Preamble

The House met at half-past Two o'clock

PRAYERS

Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BRITISH RAILWAYS (SELBY) BILL (By Order)

Order for consideration of Lords amendments, read.

To be considered tomorrow.

FELIXSTOWE DOCK AND RAILWAY BILL

Order for consideration, as amended, read.

To be considered tomorrow.

Oral Answers to Questions — ENERGY

Coal Use (Nationalised Industries)

Mr. Dormand: asked the Secretary of State for Energy what proportion of United Kingdom coal production is purchased for use by nationalised industries.

The Under-Secretary of State for Energy (Mr. John Moore): In 1978 the proportion of the coal produced which was purchased by nationalised industries was 72 per cent.

Mr. Dormand: Is the Minister aware of the deep concern felt in the North-East about the continued importation of Australian coking coal by the British Steel Corporation? Will he tell the chairman of the British Steel Corporation to suspend imports until research being carried out by the National Coal Board into Durham 501 coals is completed? Does he not think that the time has arrived when there should be a coal summit attended by Ministers, the National Coal Board, the Central Electricity Generating Board, the British Steel Corporation and the National Union of Mineworkers to consider the whole question of coal imports?

Mr. Moore: The Government are obviously giving careful consideration to the


question of coking coal imports and the extent to which this affects two nationalised industries. I would not wish to comment immediately on the hon. Gentleman's suggestion that there should be a coal summit, but I hear his words. I hope that he will join me in expressing pleasure over the way in which extra stocks from Durham are being moved to the South of Scotland Electricity Board in considerable quanties. To that extent, the Government are apprised of the problem. I repeat that I hear what he says about a coal summit.

European Community (Council of Energy Ministers)

Mr. Meacher: asked the Secretary of State for Energy when he expects to attend an EEC Energy Council.

Mr. John Evans: asked the Secretary of State for Energy when he expects next to met the European Economic Community Energy Ministers.

The Secretary of State for Energy (Mr. David Howell): I expect to meet other EEC Energy Ministers at the next meeting of the Energy Council, which is due to take place this autumn under the Irish presidency.

Mr. Meacher: What action are the Government taking to oppose the Commission's declared intention to abolish the offshore supplies interest relief grant scheme? Does the right hon. Gentleman accept that including EEC sub-contractor components would completely contravene the national interest criteria of our own legislation? Or does he intend tamely to accept this unwarrantable intrusion into British industrial policy which will cost this country tens of thousands of jobs?

Mr. Howell: I am not sure that I accept the rather extravagant estimates of the hon. Gentleman. He has perhaps missed the statement made by the Government. It is our intention, at the end of next March, to end the IRG scheme. That has been announced. The Commission has been informed of our decision. I do not know its views on the matter.

Mr. Evans: Will the Secretary of State discuss with his European colleagues the impact of oil price rises on the EEC's economy? Will he suggest to them that the OPEC countries might be more concerned

or more determined in their attitudes if countries such as Britain stopped increasing tax, such as VAT, on petrol and petroleum products?

Mr. Howell: We discussed these matters at the Energy Council. To reduce the tax on petroleum products and on petrol would encourage further consumption. A major aim of policy must be to pull back consumption in order to take the tightness out of world markets and to stop huge profits from being transferred to the Arab OPEC monopoly. That is surely what the hon. Gentleman wants. It makes sense to keep on this tax.

Mr. John H. Osborn: Is my right hon. Friend aware that he is a welcome member of the Energy Council instead of his predecessor? What support will he give to Commissioner Brunner and others to impose a reasonable policy on the United States of America?

Mr. Howell: I am grateful to my hon. Friend. I have talked with Commissioner Brunner and I have seen him recently. We must all support and encourage sensible measures which will enable the United States to make its contribution, through restrained demand and sensible pricing policies, to relieve the tight situation in world oil supplies that we now face.

Mr. Robert Hughes: Has the right hon. Gentleman received any assurances from our EEC partners that they will end export credit facilities for their oil-producing and manufacturing industry? If so, what machinery has he set up to monitor these assurances?

Mr. Howell: I have had no hard evidence on the kind of arrangements that the hon. Gentleman suggests, and obviously I have looked at these matters carefully in the light of our policies and decisions in this country. I am determined that we should pursue our own national interest. I came to the firm conclusion that the IRG arrangement was poor value for money, although we set it up in 1973, that it had now fulfilled its purpose, and that the sensible aim for British industrial policy was to phase it out next March. That is what we have done and what we intend to do next March.

Mr. Adley: Will my right hon. Friend take the earliest opportunity to raise with


his colleagues and with the Commission the need for the closest possible harmonisation with our EEC partners of the control of oil pollution?

Mr. Howell: Yes, I shall be glad to do so.

Coal Industry (South Wales)

Mr. Ioan Evans: asked the Secretary of State for Energy what discussions he has had with the chairman of the National Coal Board regarding the future of the coal industry in South Wales.

Mr. John Moore: I have already made clear to the chairman the Government's belief in the need for a competitive, efficient coal industry with the capacity to meet longer-term demands. The South Wales coalfield will form part of that industry.

Mr. Evans: What action does the Minister intend to take regarding the proposals made by the tripartite committee consisting of the NUM, the National Coal Board and the Government, set up by the previous Government to deal with the problems in South Wales? Specifically, what is to be done with the investment in the Phurnacite plant which produces 18 per cent. of the smokeless fuel in Britain, and the closure of the Deep Duffryn pit? Does he realise that there may be a national strike in the near future if something is not done about the latter?

Mr. Moore: There are more than one or two comments there. I would draw the hon. Gentleman's attention to the tape concerning the meeting which is to take place later this week between Mr. Gormley and the NCB. Of course, the tripartite review must be seen within the context of the review of the coal industry as a whole. Equally, I would point out that the Secretary of State has initiated the first of this Government's tripartite meetings, to be held on Thursday of this week. Obviously, that will be an important occasion. On the matter of Phurnacite, since the NCB has not yet submitted its plans, it is premature for the Government to comment.

Mr. Eadie: But, surely, the Minister must be aware of the statement by the chairman of the NCB about Deep Duffryn and also of the statement by the miners at Deep Duffryn that they would have

the opportunity to prove themselves if a capital sum were made available for redeveloping part of the pit. The Opposition would welcome that. He must also be aware that much work has been done in the South Wales working party to spotlight the problems of South Wales in relation to capital investment. Surely the Government will want to take up what the working party has said, whether as a Government or within the tripartite arrangements.

Mr. Moore: I should have thought that the hon. Gentleman, with his long experience in the coal industry, would want the Government to approach this matter with great care. One would like the review of the industry as a whole completed; I should have thought that that was approaching it in the right way. I would also presume that he would want us to continue the long accepted and proper tradition that colliery closures and the essential and detailed matters concerning specific closures are a matter for negotiation between the NUM and the NCB.

Mr. Edwin Wainwrights: Will the Minister take into account the fact that there is a shortage of anthracite in the United Kingdom and that we are having to import that kind of coal? Is it not true that there are reserves of anthracite coal in South Wales? Therefore, will he ensure that development will take place and that money will be provided for the development of anthracite and other seams in South Wales—and throughout the country—to ensure that this nation can supply the coal it will require in the next two or three decades?

Mr. Moore: I am sure that all those interested in the future of the coal industry would want investments made that are profitable in the long-term interests of the industry. To the extent that one is aware of the unfulfilled demand for anthracite, that is obviously an important positive, but I would ask the hon. Gentleman to let us have just a little more time to consider the report fully. It is crucial to see it in the context of the industry's whole investment programme.

British National Oil Corporation

Mr. Hannam: asked the Secretary of State for Energy when he plans to meet the chairman of the British National Oil Corporation.

Mr. Eggar: asked the Secretary of State for Energy when next he will meet the chairman of the British National Oil Corporation.

Mr. David Howell: I see Lord Kearton regularly.

Mr. Hannam: Will my right hon. Friend confirm that at the end of 1978 only 28 per cent. of BNOC's North Sea oil was getting to our filling stations? Does not that fact, coupled with the fact that exploration activity has nearly halved since 1977, confirm that nationalisation does not necessarily prove to be to the benefit of the national interest?

Mr. Howell: I think my hon. Friend is asking me about the share of United Kingdom continental shelf crude going to British markets. The figure of 28 per cent. is not one that I would wish to confirm as part of the total, but I can tell him that, of the roughly 25 million tonnes being handled this year by BNOC—that is, excluding oil sold back to companies under the terms of some participation agreements—about 45 per cent. is presently expected to be sold to United Kingdom refineries. On the broader issue of BNOC, all its activities and finances are currently being reviewed and I hope to make a statement on the outcome of that review at the appropriate time.

Mr. Eggar: When my right hon. Friend next meets the chairman of BNOC, will he point out to him that there is no justification whatsoever for BNOC's role as a Government adviser, nor for its role as a major crude oil marketer? When he makes his statement, will he make that clear?

Mr. Howell: Those are precisely the matters that the Government are looking at in the review. When I make the statement on the matter, I shall give the Government's conclusions on those propositions.

Mr. Palmer: Will the Secretary of State assure us that he will look at the future of BNOC from a purely practical and empirical point of view and not on lines of doctrine?

Mr. Howell: Excessive doctrine is one of the difficulties—the curses, let us say—

under which this corporation was born. I agree that it is important to look objectively at the needs of the British people and the British nation as regards oil, free from assertions of dogma about what kind of organisation or institution is the answer.

Mr. Skeet: Will my right hon. Friend ensure that the review of BNOC is speeded up? Will he bear in mind two considerations—first, that special licence areas should not be granted to BNOC outside normal rounds; second, the fact that royalties are paid to the Chancellor of the Exchequer—that is, the Treasury—and not on account of BNOC?

Mr. Howell: I take note of those detailed points, but they are all matters falling within the scope of the review, and I cannot anticipate my statement on its outcome.

Dr. Owen: Will the right hon. Gentleman confirm that BNOC, because of its 51 per cent. participation agreement, was able to sell its oil back to Shell, Esso and Texaco on condition that it was retained in the United Kingdom market, and that it was able to negotiate to ensure that the firms' own 49 per cent. was retained in the United Kingdom market? Is he now satisfied, having looked at the figures, that BNOC did everything possible to protect the home market and that it is the export deals made by some other companies which have prejudiced our ability to get hold of North Sea oil?

Mr. Howell: I can confirm that BNOC has been encouraged to renegotiate some of its contracts in line with a more normal trading pattern and the more sensible price regime which now prevails in the British market than the one which we found when we came to office. [HON. MEMBERS: " Sensible? "] Certainly, because to keep prices and taxes suppressed leads directly to the shortages that we experienced in May. That is a more healthy position. As to being satisfied with the arrangements that have been made both by the major oil companies and by BNOC, which is of course a major oil company, all oil companies—BNOC was no exception—took certain views last year about the development of oil markets which, since they had limited information about what was to come, were overtaken


by events. In those events, many oil companies—again, BNOC is no exception—have found difficulties and have had to renegotiate their arrangements.

Aquapet

Mr. Dalyell: asked the Secretary of State for Energy what study he has made of aquapet, mixing petrol with a combination of oxygen and hydrogen, which is claimed to reduce petrol consumption by up to 40 per cent. while increasing power output; what help he is giving to firms pioneering such experiments; and if he will make a statement.

Mr. John Moore: An independent consultant has reported on the " Aquapet " system and Department of Industry experts have carried out tests on the modified engine. These have shown that its application could not lead to energy savings and this is the view of my experts. I am always interested to learn of schemes for energy conservation, but the question of support for the development of more efficient engines is a matter for the Department of Industry.

Mr. Dalyell: Why does it not lead to greater energy savings?

Mr. Moore: It is difficult enough being a politician without being a chemical and industrial expert. I am giving the details as briefly as I can of the view of the independent and outside consultant. The conclusions seem to be clear. They were provided to the inventor. If there is a request for publication, I shall discuss the matter with my officials. But we are dealing with an outside consultant as well as with officials. I can see no reason why such a request should not be put to my officials.

Mr. Whitehead: Will the Minister's advisers also examine the new combined alcohol and petrol engines which have been used in California? Surely that is a better use for alcohol than some of the uses to which we put it?

Mr. Moore: I do not wish to enter into a discussion about what use of alcohol is better for the country. Any such ideas should be examined. Nobody suggests that any one expert opinion is sufficient. Any suggestions made by hon. Members will be pursued.

Mr. Adley: Is my hon. Friend aware that those of us who have had contact with the Warren Spring laboratory will be faintly depressed by what he has said? Is he aware that the laboratory's activities generally revolve round the opinion that if it has invented something it is good and that, if anybody else has, it is not?

Mr. Moore: I hear my hon. Friend's comments. However, when we employ vast numbers of officials and people with knowledge in this sphere, occasionally we should concern ourselves more rationally with what they say.

Dr. M. S. Miller: Will the Minister ensure that his advisers have no financial connection with the oil industry?

Mr. Moore: I do not think that question merits an answer.

Coal Production

Mr. Neubert: asked the Secretary of State for Energy how many extra tons of coal have been produced in the last year as a result of colliery incentive agreements, and whether he is satisfied with present levels of output.

Mr. John Moore: The conditions under which coal is mined are constantly changing and precise comparison of output with what it might have been without the incentive schemes is impossible. Since their introduction, however, the earlier trend of declining productivity and output has been reversed. Nevertheless, the board and the unions are far from satisfied with the present output, and I very much welcome the joint efforts that they are making to improve it.

Mr. Neubert: Do not the generally disappointing results underline how unwise it would be to impose a tax on gas, since that would strengthen the miners' monopoly on the production of coal at a time when production and productivity in the industry appear to be sagging, at increasing cost to the consumer?

Mr. Moore: The gas industry is under review. I hope that hon. Members on both sides of the House will look more closely at productivity. Those who have more experience than I of the mining industry will be aware that the matter is more complex than the surface figures of output per manshift illustrate. I draw attention to the face output as opposed


to the elsewhere below ground output. This reveals a different picture, especially as there has been a more than 10 per cent. increase in face output.

Mr. Woodall: Is the Minister aware that there is a severe shortage of trained face workers in nearly all coalfields? Does he agree that, when the average earnings of a face worker are only £109 a week, the shortage is not likely to be filled by volunteers? What are the Government planning to do about it?

Mr. Moore: In the brief time that I have held this office and from the visits that I have made to coalfields and training schemes, I have been heartened to see the large numbers of qualified young men of high standard applying for jobs in the industry. But I should be happy to pursue this, given details.

Mr. Stokes: How can increases in miners' pay be justified when there is so little increase in productivity? Will those increases not result in higher unemployment?

Mr. Moore: With respect, I must remind my hon. Friend that the industry has a pattern of long-term investment decline. Turning out of that decline and the long decline in productivity was a hard task for the industry. Neither the NUM nor the NCB is suggesting that there is cause for satisfaction in the present figures, but there seems to be more cause for hope when we concentrate on the real figures rather than on the surface figures.

Oil Supplies

Mr. Knox: asked the Secretary of State for Energy if he will make a statement on the current situation relating to petrol supplies.

Mr. Rost: asked the Secretary of State for Energy if he will make a statement on the current oil supply and stock situation.

The Minister of State, Department of Energy (Mr. Hamish Gray): There has been little change in the oil supply situation since my right hon. Friend's statement to the House on 11 June. Petrol supplies have eased slightly, but there remains a need for all consumers to make every possible economy in their use of oil products.

Mr. Knox: Is my hon. Friend aware that customers of those filling stations whose contracts with oil companies have expired and have not been renewed are experiencing difficulties, particularly in the less densely populated areas? Can he suggest a solution?

Mr. Gray: The Department is keeping in close touch with the oil companies and distributors. If my hon. Friend has knowledge of an individual case, I shall investigate it.

Mr. Rost: Can my hon. Friend confirm that if we are to avoid real long-term oil shortages of American proportions the consumer will have to accept the world price for petrol and the justification for Governments to impose taxation, provided that that taxation is used to trigger off conservation and investment in providing alternative sources of energy which will make us less dependent upon oil in the long term?

Mr. Gray: My hon. Friend is correct. Conservation must be the first priority. In spite of the recent increases in the price of petrol, in real terms the price is still lower by several pence than it was in 1974.

Mr. Hooley: Is the Minister aware that in three weeks' time millions of industrial workers and their families will be taking their holidays in Scotland, Wales and the West Country? What arrangements is he making to discuss with the oil companies and the distributors a reallocation of supply to take account of that, so that holidays are not spoiled throughout the United Kingdom?

Mr. Gray: The allocation system operated by the oil companies is based upon the amount of petrol sold in the corresponding month last year. Therefore, the tourist areas will, to some extent, reflect the holiday traffic. The greatest contribution which hon. Members and the media can make is to avoid creating a panic where no real shortage exists.

Mr. McQuarrie: Is the Minister aware that, due to the complex system operated throughout Britain last year and because supplies are based on 1978 figures, there is a greater outflow in the towns and cities because of cut prices, to the detriment of rural areas? That applies in particular to rural areas in Scotland which rely upon the tourist industry.
Will the Minister make representations to the oil companies to the effect that they should allocate further supplies to the rural areas and take no account of increased sales resulting from cut prices?

Mr. Gray: The Secretary of State and I have regular meetings with the oil companies and representatives of the distributive industry. The suggestions which my hon. Friend makes have been drawn to their attention. I am confident that during the tourist season difficulties will not be experienced to any great extent.

Mr. Sheerman: Will the Minister ensure that the Government place advertisements in the national press, and in the popular media in particular, giving assurances to holiday makers? Is he aware that in West Yorkshire holiday bookings are down by about 40 per cent? I believe that that is true everywhere else. Is the Minister aware that many people are losing a lot of brass in mine and other constituencies? Is it not time that people were assured that they can get petrol when they go on holiday this summer?

Mr. Gray: I am sympthetic to what the hon. Member says. This situation can best be handled by the tourist authorities. Some authorities are already making this their business and advertising that there is plenty of petrol in their area. That is to be commended.

Mr. Maxwell-Hyslop: Is it Government policy to encourage ordinary motorists, where possible, to convert in their purchasing from petrol consuming to diesel consuming vehicles? Will the Minister make a statement about the availability of derv to agriculture in rural areas?

Mr. Gray: The situation is that we encourage them by means of a conservation policy. We must look at the most suitable method. My right hon. Friend will be making known his views on conservation by means of a statement at the appropriate time. On the second point raised by my hon. Friend, this is something to which we will certainly give Further consideration.

Mr. Eadie: Is the Minister aware that his statement at the weekend—made, as I understand it, in the cosy comfort of a Conservative school—that free market pricing is the cure for oil and petrol

shortages is nonsense? No reputable fuel economist would agree with him. Is it not time that this Government started to govern and put a stop to the oil companies playing ring-a-ring o' roses with them?

Mr. Gray: There is no doubt that in the months and years ahead we shall look to the oil companies to make positive investment in the North Sea with some of the money to which the hon. Gentleman refers. We shall do this by encouraging them with proper policies, to be announced shortly, which will try to retrieve the situation we inherited, which was that there was a massive lack of investment in the North Sea over the past two to three years.

Electricity Discount Scheme

Mr. Dubs: asked the Secretary of State for Energy what plans he has to extend the electricity discount scheme to users of other types of fuel.

Mr. Rooker: asked the Secretary of State for Energy if he is satisfied with the operation of the winter fuel discount scheme.

Mr. Cartwright: asked the Secretary of State for Energy whether he proposes to continue the electricity discount scheme during the coming winter; and if he will make a statement.

The Under-Secretary of State for Energy (Mr. Norman Lamont): As my right hon. Friend the Minister with responsibility for the disabled said in answer to a question in the House on 18 June, the Government have the question of assistance with fuel costs under review against the background of their public expenditure objectives and the need to avoid further complication of the social security system. The Government will make a statement in due course.

Mr. Dubs: Is the Minister aware that many elderly people are particularly concerned about their fuel bills this winter? Will he make a statement soon to allay their anxiety?

Mr. Lamont: The Government are well aware that elderly people are particularly likely to be hard hit by the rising cost of energy. This is a matter we have very much in mind in our review,


and I can assure the hon. Gentleman that a statement will be made.

Mr. Rooker: As I understand that the Summer Recess will not end until early November, will the Minister make a statement before we rise for the Summer Recess so that the working poor and the pensioners know what is going to happen next winter? If the Government intend to reintroduce the scheme next winter, will he give the House an assurance now that he will not allow the sharp practice occurring in my constituency by the Midlands Electricity Board of bringing forward meter readings? In that context, I thank the Minister on behalf of my constituents for the action he took following my Adjournment debate on 16 May.

Mr. Lamont: Of course, the Government appreciate the urgency of the matter and the need for a statement to be made at the earliest opportunity. I hope that one will be made before the House goes into recess. It is not right, however, for the hon. Gentleman to describe what happened as " sharp practice ". The hon. Gentleman has acknowledged that I and the officials investigated the matter that he brought to our attention and that we were able to get a rebate for his constituents.

Mr. Cartwright: Is the Minister aware that the policy of rationing fuel by means of high prices causes tremendous hardship to pensioners and other poor families? Does he accept that the electricity discount scheme, welcome though it is, does not help a great many families in need? What steps is he taking to co-ordinate Government policy to ensure that there is a genuine attack on this problem of fuel poverty so that even the poorest families can afford adequate heating for their homes?

Mr. Lamont: I note what the hon. Gentleman says concerning rationing by price, but there are many disadvantages to rationing by other means. The system of open rationing and allocations that he seems to advocate will not ensure that help goes to the most needy. He points out various disadvantages in the discount scheme and those are precisely the factors that we are bearing in mind in our review of the scheme. My hon. Friends and I are in touch with the Department

of Health and Social Security all the time about this very important question.

Mr. Sainsbury: Will the Minister take into account the fact that it would probably be fairer to all pensioners, regardless of the type of fuel they use, if such sums of money as were available were to be given for insulation, or for the installation of more efficient appliances, rather than for subsidising the consumption of electricity?

Mr. Lamont: I note what my hon. Friend says. There are more competing claims on public expenditure and obviously energy conservation is of great importance.

Mr. Ashton: The Minister is aware that we have had a rent rebate system in this country for many years. In his statement will he announce the establishment of a fuel rebate system? Is he aware that many pensioners and poor people in rural areas will have trouble in paying for the fuel for their Aga cookers and that many pensioners who rely on paraffin will not be able to obtain supplies this winter? Will the Minister take action before the House rises at the end of July to let those people know what the situation will be?

Mr. Lamont: I have already said that we are considering the whole question not just of the discount scheme but of fuel costs and assistance with those costs. We are well aware of the problems facing elderly people and others in rural areas and this has been taken into account in our uprating of benefits. I can assure the hon. Gentleman that a full statement will be made.

Mr. Alan Clark: Does the Minister agree that all forms of concession that allow one section of the community to get something below the market price can be paid for only by the rest of the community? Does he recognise that that is, in effect, a redistribution of wealth and that this Government were not elected to bring that about?

Mr. Lamont: My hon. Friend is quite right. These schemes have to be paid for out of public expenditure. I said in reply to the first question that we have very much in mind the matter of public expenditure.

Domestic Heating Oil (Supplies)

Mr. Michael Morris: asked the Secretary of State for Energy what further discussions he has had with the oil companies to ensure an adequate and equitable supply of domestic heating oil for the coming winter.

Mr. Gray: My right hon. Friend the Secretary of State and I are having regular discussions with the oil industry on all aspects of the supply of all major oil products. On present indications, a 5 per cent. saving in the use of oil should be sufficient to ensure that supplies this winter are adequate to meet demand.

Mr. Morris: Will the Minister point out to the oil companies that domestic heating oil is used primarily in rural areas and on some major council estates? Is it not the case that this is the one area of oil consumption where there is no alternative source? Will the Minister take on board the point that domestic consumers would rather see a cut in the other uses of oil, such as petrol, than in heating oil where they have no other choice if it is a tough winter?

Mr. Gray: This is a very important point which my right hon. Friend and I have discussed with the oil companies. Though it is not quite of such importance in mid-summer, we have emphasised to the oil companies the importance of this issue as autumn approaches.

Mr. Gwilym Roberts: Will the hon. Gentleman look particularly at the problem of paraffin and accept from me that his recent statement—that the price of paraffin is to be allowed to shoot upwards—will cause great consternation among pensioners and others on low incomes who depend on paraffin?

Mr. Gray: It is very much preferable to there not being any paraffin available, which was the danger if we did not allow that to happen.

Mr. Penhaligon: Can the Minister say how, if we are to have a 5 per cent. reduction in supplies, some of the individual companies—which have a monopoly in certain areas—are 20 per cent. ahead on fuel supplies? What powers does the Minister have to make the oil companies share their fuel?

Mr. Gray: I accept that the 5 per cent. shortage has not been experienced across the board. However, by means of negotiation this has been overcome to a very large extent. The regular meetings that we have had with the Petroleum Industry Advisory Committee and with certain distributors have helped. We shall continue to keep a close watch on the situation so that no area has to go without fuel.

Combined Heat and Power (Marshall Report)

Mr. Forman: asked the Secretary of State for Energy if he will now publish the Marshall report on combined heat and power.

Mr. Welsh: asked the Secretary of State for Energy when he expects to publish Dr. Walter Marshall's report on combined heat and electrical power generation.

Mr. John Moore: I am arranging for the report of the combined heat and power group and an associated study of " Heat Loads in British Cities " to be published as energy papers later this month. Other supporting studies will be made available to the public at the same time.

Mr. Forman: Is my hon. Friend aware that many of us welcome that announcement and urge him to go further quickly and initiate a full-scale demonstration project of this very promising technology? Will he look into the possiblity of getting some funds from EEC sources to meet the cost of that demonstration project since there is reason to believe that these might be forthcoming?

Mr. Moore: I know of my hon. Friend's long interest in the subject, and I can assure him that the report raises major issues. Since the subject has been five years in the melting-pot, my hon. Friend will not wish me to comment until the Government have had time to make a proper statement on the report.

Mr. Welsh: Is the Minister aware that power stations waste a great deal of energy? Is he aware that over 60 per cent. of it goes up into the atmosphere? Does he realise that this does not happen in most European countries where waste heat is harnessed and used in combined heat and power schemes? Will he make a statement on the Government's attitude


to combined heat and power schemes in this country? Will he take the opportunity offered by the Summer Recess to visit those countries in Europe where these schemes are operated so that he may see how efficiently they are run?

Mr. Moore: Such an invitation is almost impossible to resist after two months in office. I can reassure the hon. Member, however, that in my first week in office I visited the Hannessari B combined heat and power station in Helsinki. I had the opportunity to examine the system in operation before receiving the Marshall report. Since the subject has been under study for five years I imagine that no hon. Member would want us to rush a judgment after two months. However, we shall study the matter, and publication of the report will be made, with a press conference, on 26 July.

Mr. Rost: Does my hon. Friend agree that the principal reason why combined heat and power is so little used in this country compared with other European countries, and why we are bottom of the league, is that we have a nationalised monopoly utility in electricity that has constantly prevented the development of combined heat and power in partnership with industry and local authorities?

Mr. Moore: I think that we should avoid decrying too much our efforts in this area, since in industrial terms we are relatively far forward. Our older industrial base makes progress in this matter much more difficult in the more heavily populated areas. These are the sort of fundamental problems that we shall be considering when we come to tackle the report in detail.

Mr. Allan Roberts: Does the Minister agree that some of the enthusiasm he has shown for combined heat and power will be to no avail if, in the next few years, local authorities are not allowed to develop district heating schemes? Does he further agree that the current cuts in local authority expenditure, particularly on housing, are likely to prevent district heating schemes from being developed, and that that would jeopardise combined heat and power in the future?

Mr. Moore: I cannot accept that. The sort of capital investment and lead times that will have to be discussed in regard to combined heat and power are

much more substantial than the kind of short-term measures that will have to be taken to get our domestic economy back into shape.

Coal-Fired Power Stations (Sulphur Emission)

Mr. Sainsbury: asked the Secretary of State for Energy what representations he has received about the level of sulphur emission from coal-fired power stations.

Mr. Norman Lamont: I have received no specific representation about this. However, the question of sulphur pollution is to form a substantive element of the coal study being undertaken by the Commission for Energy and the Environment.

Mr. Sainsbury: Does my hon. Friend agree that it is important when we are comparing the economics of alternative sources of power generation that we take into account the need to ensure that whatever source is used is made as pollution-free as is technically possible, and that the cost of doing so is taken fully into account?

Mr. Lamont: Of course, that is absolutely right. That is one reason why the Commission for Energy and the Environment is making its study. Of course, costs must be borne in mind.

Mr. Roy Hughes: Does not the Minister agree that the minor irritation referred to by the hon. Member for Hove (Mr. Sainsbury) does not compare with the hazard of a nuclear energy programme? Bearing in mind our vast coal resources, will not the Minister urge the Government to make a massive investment in this vital industry?

Mr. Lamont: I do not think that that issue arises on this question.

Turbine Generators (Torness and Heysham)

Mr. Mike Thomas: asked the Secretary of State for Energy whether he is now able to make a statement about the turbine generator orders for the advanced gas-cooled reactor power stations at Torness and Heysham.

Mr. Norman Lamont: This is primarily a matter for the generating boards. An announcement will be made shortly.

Mr. Thomas: Will the Minister be more specific? He will know of the concern of all those who work in the industry that this announcement should be made. We have been told that it might be made before the end of this month. Can he confirm that? Second, did the Minister see the " Panorama " programme last week and the outrageous attacks made in it on the whole AGR programme? Will he resist that kind of public relations blandishment, stick to his guns, get on with this programme and get the orders placed? Regardless of the merits of nuclear power or nay, if we are to proceed in this direction we should do so quickly.

Mr. Lamont: I cannot be more specific. The hon. Gentleman will have to await the announcement that will be made shortly. I am afraid that I did not see the television programme to which he referred, although I have had a report about it. We will not be pushed into any particular solution or reactor choice. This matter requires the most detailed, careful and intensive study.

PARLIAMENTARY REFORM

Mr. Canavan: asked the Chancellor of the Duchy of Lancaster whether he will make an additional statement about Government proposals for the reform of Parliament.

Mr. Cryer: asked the Chancellor of the Duchy of Lancaster what improvements to procedure he intends to introduce.

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): As I made clear during the debate on the new Select Committee system on 25 June, the Government will be bringing forward further proposals to enable the House to reach conclusions on the other recommendations in the First Report of the Select Committee on Procedure.

Mr. Canavan: Since the Scottish Office is the most multi-purpose and one of the most bureaucratic Departments of State, why has the establishment of a Scottish Select Committee been omitted from the list of Select Committees already announced by the Government? Is the Leader of the House aware that it will be

completely unacceptable for the setting-up of our Scottish Select Committee to be delayed simply because the Government are bereft of any policy on devolution? By the way, what is happening about the inter-party talks on devolution?

Mr. St. John-Stevas: I do not accept the premises of the hon. Gentleman's question. The Scottish Office is as efficient and expeditious as any other Department in Whitehall. I have made clear to the House that the Government intend to set up a Select Committee, but its terms of reference will be best decided after a successful conclusion of the inter-party talks. I have been pursuing with energy and dedication the task of setting up the talks, but there have been some difficulties that have not yet been overcome.

Mr. Cryer: Does the Leader of the House recall that when he was talking about the phased introduction of salary increases for Members of Parliament he said that the arrangement would have to be seen to be fair? Has the Chancellor given some consideration to introducing a necessary reform—that of full-time MPs? Does he not think that factory workers see it as an outrageous disgrace that Members of Parliament earn substantial salaries and yet are able to line their pockets as frequently as they like with the proceeds of parliamentary advisers' posts and directorships? When Conservative Back Benchers talk about miners' productivity, does he not think that that creates a sense of outrageous injustice since it comes from Members of Parliament who have never been down a mine and do not intend to go near one but who can earn part-time as much as they like?

Mr. Speaker: Order. I remind the House that Question Time is not the time for speeches but for questions. [An HON. MEMBER: " That was very good."] It might have been, but this is the time for questions.

Mr. St. John-Stevas: Perhaps I may bring the hon. Member for Keighley (Mr. Cryer) down to earth again. With reforms of this House we must proceed by consensus as far as possible. We cannot introduce changes which are resisted by a substantial minority of hon. Members. As far as I know, in this case the concept of full-time Members means their being


unable to take outside employment, which is rejected by the vast majority of hon. Members. The House benefits from the experience hon. Members gain in other spheres.

Mr. Dorrell: Is my right hon. Friend aware that over the years there have been one or two criticisms of the composition of another place? What are the Government's plans to reform the other place, and when does my right hon. Friend expect to be able to announce that reform?

Mr. St. John-Stevas: The Government have no plans to reform the other place, which is a body respected throughout the country for the quality of its debates and its utility as a revising and amending Chamber.

Mr. Dalyell: What is the criterion of success in the all-party talks?

Mr. St. John-Stevas: The criterion of success in the all-party talks will be a solution which will be of benefit to the entire United Kingdom.

Oral Answers to Questions — PALACE OF WESTMINSTER

Staff Pensions

Mr. Thomas Cox: asked the Chancellor of the Duchy of Lancaster what is the present pension system for manual workers employed in the Palace of Westminster.

Mr. St. John-Stevas: Industrial civil servants employed at the Palace of Westminster by the Department of the Environment and the Property Services Agency are covered by the principal Civil Service pension scheme, which applies to virtually all established civil servants. Staff in the Refreshment Department of the House do not at present have a pension scheme, but the details of a scheme are currently under negotiation, and I hope to be able to put forward proposals to the House in the near future.

Mr. Cox: I note the latter part of the right hon. Gentleman's reply, but does he agree that under successive Governments the way in which many staff who work here have been treated can only be described as utterly deplorable? In view of the comments that he has made, will

the right hon. Gentleman make urgent representations, with the appropriate trade unions, for the introduction of a scheme, and will he in particular bear in mind those who may be retiring within the next year or two and who may not be covered by a new scheme? Does he recognise that their problem is most pressing?

Mr. St. John-Stevas: I am aware of the pressing problem of the group of staff to whom the hon. Gentleman refers. I hope that we can make progress, but it is essential that we have an equitable arrangement which will apply to all.

Mr. Skinner: When is " the near future "?

Mr. St. John-Stevas: I am not in the realm of prophecy—

Mr. Skinner: It was the right hon. Gentleman who said it.

Mr. St. John-Stevas: —I am not in the realm of prophecy, unlike the hon. Gentleman, but I am hopeful that if the objections, which are now really minor, can be overcome, we shall have a settlement by the end of the year.

Mr. David Price: Is my right hon. Friend aware that he has the support of both sides of the House in trying to do right by those who have served us in the House? The fact that they are formally established or non-established civil servants is totally irrelevant.

Mr. St. John-Stevas: I am most grateful. As so often, my hon. Friend has expressed the mind of the whole House.

Oral Answers to Questions — HOUSE OF COMMONS

Administration (Bottomley Report)

Mr. Wrigglesworth: asked the right hon. Member for Chelmsford, as representing the House of Commons Commission, what progress has been made with the implementation of the report of the committee chaired by the right hon. Member for Middlesbrough (Mr. Bottomley) on the administration of the House of Commons.

Mr. St. John-Stevas: I have been asked to reply.
Since the Commission came into being on 1 January, further progress has been


made in implementing the report in accordance with the provisions of the House of Commons Administration Act 1978. In particular, a Board of Management has been established. Further details will be available with the publication of the report of the Commission for the financial year 1978–79, which is planned for August.

Mr. Wrigglesworth: Is the right hon. Gentleman aware that there are grave doubts about the determination of the House authorities to implement some of the recommendations of the Bottomley committee, and these anxieties have been caused by the fact that it has taken two months to get the new House of Commons Commission appointed, that no recognition agreements have been reached with the trade unions in this place, and the whole question of the grading review, which was fundamental to the Bottomley reforms, has not so far been agreed? Will the right hon. Gentleman comment upon those points, and could he press the Commission to make early progress with them?

Mr. St. John-Stevas: There have been difficulties in setting up the Commission, and they have now, I hope, been overcome. As the hon. Gentleman will know, the Commission has been set up and will be tackling a number of problems. The hon. Gentleman will recognise that the question of recognition which he raises is a complex and complicated problem. The Commission will have to approach it with preparation and intrepidity. Certainly, it will note what the hon. Gentleman has said.

Mr. David Price: In considering this and related questions, will my right hon. Friend bear in mind that membership of the House is not in the ordinary trade union sense of the word a job of work but is a way of life?

Mr. St. John-Stevas: I entirely agree with my hon. Friend. Membership of the House is not so much a programme, it is more a way of life.

CASH LIMITS

Mr. Adley: asked the Paymaster General what effect he expects tighter cash limits to have on the work of his Department.

The Paymaster General (Mr. Angus Maude): The work of my Office consists of paying pensions and handling Government banking work, and the volume of this work depends on the demand. Provided that there is no unforeseen increase in this volume, my Office expects to be able to operate within the recently revised cash limit without appreciably affecting the efficiency of its service.

Mr. Adley: I welcome my right hon. Friend to his role and thank him for that answer. Is he aware that there is unlikely to be a reduction in his Department's work load from my constituency because of the large number of pensioners who live there? Further, is he aware that many of those pensioner constituents, especially those who receive their pensions through the post, have in the past few months been suffering increasing delays? Can my right hon. Friend tell the House why there has been this increasing delay over the past few months, and whether it would be possible for him, without increasing public expenditure, to post the pensions a little earlier so that people could get them on time?

Mr. Maude: I am aware that there have been regrettable delays in paying pensions. There was a certain backlog in work due to industrial action, and more recently there has been delay owing to hold-ups in the postal service. My Office has done all it can to minimise these delays by posting payments earlier and has offered to help in individual cases where it can. I am glad to say that I understand that the situation is now improving.

Mr. Robert Hughes: Is the right hon. Gentleman aware that there is serious delay in the issue of new pension books, and that one constituent of mine, for example, has been waiting 15 weeks, with no pension? Will he look into this matter?

Mr. Maude: Yes, Sir; if the hon. Gentleman will give me details of that, I shall certainly look into it.

Mr. Hannam: Will my right hon. Friend confirm that it was the last Government who altered the postal arrangements for payments to pensioners from first-class to second-class post, thereby adding considerably to the delay?

Mr. Maude: Yes, Sir, that is true. The last Government, when looking for economies in public expenditure, decided that my Office should send out its pension books by second-class rather than first-class post, and there was in fact a considerable saving in public money as a result.

Mr. Skinne: Is the right hon. Gentleman aware that there is another group of people, who in some cases have worked for as long as 30 years in the Palace of Westminster—some of them behind the staff bars, the cafeteria, the Tea Room and so on—and they have no pension at all? They took certain limited industrial action—

Mr. Speaker: Order. The Minister can answer questions only in respect of those for whom he is responsible, and I think that he is not responsible there.

PAYMASTER GENERAL (PRESS MEETINGS)

Mr. Christopher Price: asked the Paymaster General what meetings he has held with representatives of the press in his official capacity.

Mr. Maude: None, Sir.

Mr. Price: When he does meet representatives of the press, will the right hon. Gentleman continue the arrangements with the Daily Mail under which scurrilous and untrue Conservative Party press releases issued under his own name are reprinted verbatim in the Daily Mail, as they were on 26 April during the general election campaign under the title " Twelve Labour Lies "? Now that the Chancellor of the Exchequer has virtually doubled VAT, prescription charges have been increased, and the Government intend to sell off BP, will the right hon. Gentleman, having earlier made those allegations against the Labour Party, now withdraw the accusation and apply it to himself?

Mr. Maude: I do not think that that arises out of the original question.

PAYMASTER GENERAL (ENGAGEMENTS)

Mr. Cryer: asked the Paymaster General if he will state his engagements for 9 July.

Mr. Maude: Apart from my attendance in the House and a visit I made to the press division of the Department of Education and Science this morning, I have no engagements today outside my office.

Mr. Cryer: rose—

Mr. Speaker: Order. The House knows what I have said about open questions addressed to anyone other than the Prime Minister. I propose to exercise my discretion not to call a supplementary question. I have said it on three occasions.

Mr. Cryer: On a point of order, Mr. Speaker. Your decision on question No. 59, Mr. Speaker, not to allow any comment came as something of a surprise. First, Mr. Speaker, you prejudged my supplementary question, which could have been about the reply. I know that that would be rather strange in the House of Commons, but it is a possibility that should not be excluded from your thoughts, Mr. Speaker. Secondly, with a new Government there are inevitably a number of members of that Government whose role is somewhat shadowy.
Your decision, Mr. Speaker, would be fair in the fullest sense only if there were a comprehensive definition of each area of governmental activity. The Table Office accepted question No. 59. As you know, Mr. Speaker, the Table Office rejects questions that are outside the area of responsibility. The Table Office having accepted the question, there should be an opportunity for a supplementary question. To do otherwise is, in effect, to gag Members of Parliament, which is a serious matter. I ask you, Mr. Speaker, to request a definition of governmental duties of the utmost detail to be available at the Vote Office so that hon. Members will have the right to subject the Executive to proper examination.

Several Hon. Members: rose—

Mr. Speaker: Order. Within the past two weeks I have reminded the House of


the ruling that I gave twice before, in which I said that to protect the Order Paper and to stop every Minister having a long list of questions about his engagements. I do not propose, until the House instructs me otherwise, to call any hon. Member to ask a supplementary question of a Minister, other than the Prime Minister, when it is a shot-in-the-dark question. Until the House instructs me otherwise, that I propose to do.

Mr. Cryer: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. I shall take a point of order but not a point of disputation.

Mr. Cryer: You have said, Mr. Speaker, that that is your ruling until you receive contrary instructions from the House. That is understood. However, how does the House produce that instruction, bearing in mind that business is in the control of the Government? The Government want the advantage of not having general questions, so they are hardly likely to provide time for debating a motion giving you fresh instructions, Mr. Speaker.

Mr. Speaker: The hon. Gentleman is right in that I do not draw up the Order Paper. It is equally right that I have received forceful protests from both sides of the House, the protesters rejecting the farce of the open question that removes from the Order Paper notice to the House of the real question that is to be asked.

QUESTIONS TO MINISTERS

Mr. Hannam: On a point of order, Mr. Speaker. With the Leader of the House present, may I refer to energy questions and the time that is allocated? Since the previous Parliament we have lost five minutes from the limited time that is available for energy questions. Bearing in mind the increasing importance of energy to hon. Members and their constituents,

I ask that the time available for energy questions be restored to the previous allocation. You will have noted. Mr. Speaker, that we reached only question No. 14 on the Order Paper.

Mr. Speaker: The hon. Gentleman will know that I do not control the Order Paper. However, his words will have been heard by those responsible.

Mr. Frank Allaun: On a somewhat similar point of order, Mr. Speaker. The Chancellor of the Duchy of Lancaster is still in the Chamber, and I ask the right hon. Gentleman to tell us the outcome of his discussions that originated from complaints from both sides of the House that 30 minutes, less five minutes for Prayers, is an utterly inadequate allocation to deal with Foreign Office questions.

Mr. Speaker: I allowed the hon. Member for Salford, East (Mr. Allaun) to make his point of order as I allowed the hon. Member for Exeter (Mr. Hannam) to make his. However, these are not matters for me. It would be out of order for the Leader of the House now to seek to make a statement without notice. The right hon. Gentleman will have heard what has been said.

Mr. Maxwell-Hyslop: On a further point of order, Mr. Speaker. Is it by Standing Order, or is it within the discretion of the Chair, that having exhausted questions to the Paymaster General we reverted to questions to the Chancellor of the Duchy of Lancaster rather than—as I admit I expected—to energy questions, which appear earlier on the Order Paper?

Mr. Speaker: I am grateful to the hon. Gentleman for raising that issue. I reverted to questions to the Chancellor of the Duchy of Lancaster because if there had been no questions for the Paymaster General, the questions to the Chancellor of the Duchy would have run until 3.30 p.m.

PALACE OF WESTMINSTER (SERVICES)

The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): With permission, Mr. Speaker, I will make a statement about industrial action being taken by some staff working in the Palace of Westminster beginning today.
The Institution of Professional Civil Servants has instructed its members employed at the Palace of Westminster to strike for a fortnight from today. Thirty-two staff are involved and most are expected to obey the strike call. These staff are engineers and technicians responsible for the maintenance and operation of virtually all services in the Palace of Westminster. They supervise about 170 Department of the Environment industrial staff who are not in dispute and expected to continue to work so far as they can. It is expected that they would respond to any situation involving serious risk to health or safety. The Property Services Agency will make every endeavour to maintain at least a minimum level of service.
As Members will be aware, this action is only one part of the current campaign by the IPCS. It is as a result of action taken by overseers at St. Stephen's Parliamentary Press, who are members of the IPCS, that certain material for the House, including the Official Report, has not been produced in its customary printed form since 18 June.
I am sure that the whole House would wish to express thanks to the authorities of the House who, in accordance with previous practice, are making the necessary arrangements to ensure the continued production of essential supplies on an emergency basis.
I deeply regret the inconvenience that is being caused to Members.

Mr. Foot: The right hon. Gentleman's statement is singularly uninformative. I must assume that that is intentional. However, will he tell us the scale of the inconvenience that he envisages as a result of the dispute? What is the nature of the dispute? He has hardly said a word to describe the nature of the dispute. Further, and most important, will he tell us what immediate steps are being taken

to try to secure a settlement? Finally, will he give an undertaking to report regularly to the House? We would like to know what steps the Government are taking to try to ensure a settlement.

Mr. St. John-Stevas: I am concerned about the effect of the dispute on hon. Members. I did not go into the details of the dispute because that is a matter not for me but for my hon. Friend the Minister of State, Civil Service Department, or for the Lord President of the Council in another place. It is a complicated dispute and I am surprised that the right hon. Gentleman, of all people, should urge me to move into the centre of and give details of such an industrial dispute. I thought that he was a strong upholder of Governments not involving themselves in industrial dispute.

Mr. Foot: The right hon. Gentleman has misinterpreted what I put to him. I am not asking him to enter into the detail of the dispute; I am asking him to make a report to the House on the nature of the dispute and on what steps are being taken to try to overcome it. If the right hon. Gentleman says that he is not responsible, will he arrange for the responsible Minister to be cross-examined on this issue?

Mr. St. John-Stevas: I have no ministerial responsibility for this dispute, or its settlement. Although I received a delegation from the IPCS, the responsibility for bringing the dispute to an end rests with my hon. Friend the Minister of State, Civil Service Department. He is pursuing this matter vigorously.

Mr. Cormack: Is my right hon. Friend aware that there is widespread concern throughout the House about the nonappearance of parliamentary papers? Will he make arrangements for his hon. Friend to make a detailed statement on this issue tomorrow? May we have an indication that alternative facilities will be considered if the dispute is not quickly resolved?

Mr. St. John-Stevas: I shall convey the views of my hon. Friend to the Minister of State. However, I do not see the point in having statements unless there has been some development on which it is necessary for the House to be


informed. The provision of other facilities for undertaking this work is a complex question. Before I embarked on that I should have to be satisfied that we had reached the end of the road with the present arrangements.

Mr. Beith: Is the Minister aware that many of us have considerable sympathy with the position of the IPCS—not least because it seems to be treated differently from other groups in the Civil Service? Does he accept that the way in which this dispute is being pursued in the House is not likely to further the claim, any more than actions threatening Britain's defence commitments, which also have been taken during this dispute? Is he sure that the necessary facilities exist for the House to continue to sit unimpeded?

Mr. St. John-Stevas: I cannot give a guarantee as to the future. The situation alters from day to day. However, I am satisfied that Members of Parliament can pursue their work here. They may be subject to inconvenience, but certainly not to danger. I am keeping the matter under constant review.

Mr. Latham: Is my right hon. Friend aware that there are considerations that affect a Minister making a statement to the House other than whether he has information to give—for example, the opinion of the House, which it is useful to hear? Will my right hon. Friend consider the effect on those outside the House of the non-appearance of Hansard and the Order Paper, which are extremely important to many people?

Mr. St. John-Stevas: Yes, I entirely agree with my hon. Friend, but Members of the legislature are principally inconvenienced. I am in constant touch with my hon. Friend in an endeavour to get the dispute settled. I fully realise how gravely inconvenienced everyone is by the absence of these papers.

Several hon. Members: Several hon. Members rose—

Mr. Speaker: Order. I propose to call those Members who have been rising.

Mr. Cryer: Will the Leader of the House explain how the recent Budget tax concessions failed to help solve the dispute?

Mr. St. John-Stevas: That is a matter for my right hon. and learned Friend the Chancellor.

Mr. Adley: Will my right hon. Friend say whether this dispute is an extension of the dispute that was referred to by the Leader of the Opposition when he was Prime Minister and condemned roundly and firmly by him? Is this the same dispute? If so, will my right hon. Friend consider eliciting from the Opposition whether they are as robust now in their view as they were then? The right hon. Member for Ebbw Vale (Mr. Foot) referred to alternative arrangements. Is my right hon. Friend aware that were the right hon. Gentleman sitting on the Government Front Bench he would be answering questions about private enterprise undertaking the printing of Parliamentary papers? Is my right hon. Friend giving any consideration to that?

Mr. St. John-Stevas: I find it difficult to follow those suppositions and changes of place. I would not try to interpret the right hon. Gentleman's views even when he is in opposition—let alone if he were in government.
We are doing our best to settle the dispute. The Opposition are equally concerned. I have no complaint to make about the co-operation that I have received in this matter.

Mr. Foulkes: Does the Minister agree that, in effect, he said nothing today? In future, when a statement is to be made to the House, will he arrange for it to be made by the appropriate Minister, who will be able to say something about it?

Mr. St. John-Stevas: No. I cannot agree with the hon. Gentleman that my statement said nothing. I informed the House of the extension of the industrial action to a strike by a number of the staff. It is not my business to go into the details of the dispute.

Mr. Michael Brown: Is my right hon. Friend aware that this dispute affects the rights of Members of Parliament on both sides of the House? For instance, the non-appearance of notices of motions, on the basis of which hon. Members table early-day motions, means that fewer early-day motions are now being tabled. Therefore the rights of Members of Parliament are affected as a result of the dispute.


Will my right hon. Friend ensure that immediate steps are taken to enable a private enterprise printing press to print the notices of motions?

Mr. St. John-Stevas: Of course I am aware of the inconvenience caused to hon. Members. I am doing what I can to bring that to an end. However, I do not think that it would be wise to make alternative arrangements until it has been established beyond reasonable doubt that the arrangements for printing the papers of this House under the present arrangements have permanently broken down.

WELSH AFFAIRS

Ordered,
That the matter of the report of the Price Commission, " Welsh Water Authority—Water, Sewerage and Environmental Services ", in relation to the activities of the Welsh Authority within Wales being a matter relating exclusively to Wales, be referred to the Welsh Grand Committee for their consideration.—[Mr. St. John Stevas.]

FINANCE BILL

Considered in Committee. [Progress 5 July.]

[Mr. BERNARD WEATHERILL in the Chair.]

Clause 5

CHARGE OF INCOME TAX FOR 1979–80

3.46 p.m.

Mr. John Garrett: I beg to move amendment No. 43, in page 3, line 17, leave out paragraph (b).

The Chairman: With this we may take the following amendments:

No. 42, in page 3, line 17, after ' total insert money '.

No. 9, in page 3, line 29, leave out:
' The remainder … 60 per cent'
and insert—
' The next £5000 .. 60 per cent. The next £5000 … 65 per cent. The remainder . 70 per cent.'

No. 45, in page 3, line 33, at end add—
' (3) subsection 1(b) above shall not apply to income in money's worth '.

Mr. Garrett: I have noticed in these debates that the assertion by the Opposition that this is a class Budget designed to bring about a shift in wealth in favour of high income people and their families causes Government supporters to fall about with rage, fury and guilt. Therefore, I hope to demonstrate the truth of that assertion.
Allowing for the increases in VAT and petrol prices, let alone the likely increases in mortgage interest rates, the majority of wage and salary earners will be worse off this year. Again, allowing for these inevitable price increases, the point at which a salary earner will be better off will be at well over £10,000 a year.
To allow for the increases in VAT and petrol prices is perfectly valid because, for most families, those increases are unavoidable. We demonstrated the truth of that in our debates on VAT and hydrocarbon duty. Although in the small hours of the morning the Chief Secretary, in a momentary aberration from his usual standards of logic, tried to show that there was a class of VAT-ed expenditure called " discretionary clothing ", the fact


is that all families, and especially low-wage ones, will be caught by the increased household costs caused by the Finance Bill.
The low-paid family on £55 a week will benefit over this tax year to the tune of about £1·20 a week. Such a family may expect to pay somewhat more than that in VAT on a typical family budget. This excludes increased housing costs and the big cut in the social wage that is to come, public expenditure cuts in jobs, education and other public services. Every day we read of new, even bigger cuts in prospect. These no doubt will be revealed in the summer and autumn. There is not much incentive there. In fact, it is a mockery of the condition of such families, of whom there are heavy concentrations in our inner cities and rural areas.
The manual worker on £90 a week will, in this tax year, gain about £2 a week. The combination of VAT and petrol price increases alone will leave his family worse off by about 40p a week if we adjust for the spending patterns of such a family in the family expenditure survey. At £10,000 a year, the manager's family about breaks even until the mortgage interest rate goes up. There is not much incentive there for the group on whom the Chancellor's hopes are pinned for the new dynamism of the industrial revival.
When we move further up the income and social scales, the pickings are much better. The company director's family on £25,000 a year clears, after VAT and petrol price increases, a good £1,500 a year. The cost-benefit ratio comes right only for the top boss on £40,000 a year. His net gain will be over £4,500 a year. Those figures show beyond any doubt that this is a class Finance Bill—a Finance Bill for the wealthy and for the Institute of Directors, a body which it might be unfair to refer to as the Tory Party at lunch but which has been a good friend to the Tory Party over the years.
Many of the beneficiaries of the Bill recently received large pay increases, on the ground of punitive tax rates. Now they receive tax cuts and what amounts to a double increment. As The Economist recently pointed out, the effect is much more dramatic at the top than it is for taxpayers in the middle, yet it was

the middle income taxpayers whom the Budget was supposed to stimulate, galvanise, dynamise, unshackle and generally gee up.
Strong elements of mysticism enter Conservative statements about the need to give a shot of cash adrenalin to the typical middle manager in industry and to create, in the Chancellor's words, a " successful and prosperous society " based on " successful and prosperous individuals ".
As a result of the tax changes, we are led to expect that all those thrusting executives will be searching, rather like a herd of buffalo, for our airports and the export markets beyond—[Interruption—yet the tax reliefs—

Mr. Patrick Cormack: On a point of order, Mr. Weatherill. It really is—

Mr. Bob Cryer: This is a good speech, and Conservative Members do not like it.

Mr. Cormack: It used to be a custom of the House, Mr. Weatherill, that speeches were delivered and not read as papers. It really is a bit much, and an insult to the House, that every syllable of a speech should be read from the Dispatch Box.

The Chairman: The hon. Member for Staffordshire, South-West (Mr. Cormack) is right, but full notes are always allowed, and I think that some dispensation is always given to those who speak from the Front Bench.

Mr. Garrett: I always thought that it was some kind of compliment to the House for an hon. Member to make extended notes for a speech. It helps a speaker to stick to the point. Since, in so doing, I have managed to galvanise Conservative Members into some kind of annoyance, it perfectly meets the case.
The tax reliefs do nothing for the executive on £10,000 a year or less, unless he is a non-drinking, non-smoking bachelor, travels on foot, wears zero-rated children's clothing and has the life style of Neanderthal man. The tax reliefs do a lot for the company director and the company chairman who have already reached the top. Will they be newly dynamised? The chairman of one of our


great exporting companies, who had his net income doubled to around £61,000 a year, was interviewed by The Guardian on this very point. He said, diffidently:
 Yes, I shall be better off but I don't think that in itself is the answer to the problem. I think the least of the problem is the individual's income tax. I don't think it is going to have a direct effect on export performance. I think the idea of income tax cuts across the board is to create a climate where people have more money in their pockets to do what they like with. It will take some time for that to work through the economy.
We demonstrated during the VAT debates and in the debates on hydrocarbon duty that there will not be much left in people's pockets for them to do what they like with, because that money is as good as confiscated already. There we have a No. 1 beneficiary who does not sound particularly galvanised.
What about the other 145,000 individuals who earn over £10,000 a year or, more particularly, the 15,000 people who earn over £20,000 a year? Perhaps two-thirds of them work as managers. There is a widespread belief that these people are less effective than they might be because of a lack of incentive in our tax systems that the lack of incentive discourages drive and decision-making and the desire to be promoted, and that the lack of incentive leads to a brain-drain.
Evidence is pretty hard to come by. A survey in 1978 showed that the number of managers returning to the United Kingdom exceeded the number of managers wanting to leave. A second survey in that year showed that it was very difficult to persuade managers to leave Britain for work abroad, particularly in the Middle East. It is hard to prove that managers refuse promotion because of the lack of incentive in our tax system. It is hard to prove any link between extra cash in the wallet and the quality of decision making or managerial performance. Perhaps the Treasury Minister who replies to the debate will demonstrate that he can deal much more effectively and vigorously with the case that we are making, as a result of the tax reliefs that he is getting. I look forward to his dynamic performance. At the end of the regulator debate the speech of the Chief Secretary could only be described as aching pessimism.
Even the extent to which our tax take is penal is grossly exaggerated by Conservative Members. They usually talk about the marginal rates, but if we examine the average rates of taxation, social security contributions, the effect of tax allowances, and talk about stoppages, we find that the man on twice average earnings in this country does no worse than his counterparts in Scandinavia or Germany. We are not, in general, a highly taxed country, according to the report a year or two ago of the Expenditure Committee—signed, I believe, by the present Financial Secretary to the Treasury—and the incidence of income tax is usually grossly exaggerated by Conservative Members.
Clearly, however, there must be some links between taxation and management performance. But is taxation the most important variable in the equation? Studies of motivation carried out by academics and consultants in management tend to rank financial motivation rather low on the scale for managers who have made it already to the upper ranks. Less tangible factors, such as responsibility and autonomy, appear to rank rather higher, on good research evidence.
What has always struck me is that there is surely something seriously wrong with the quality of management in Britain but that this is due, more than anything else, to lack of technical and managerial education, and to low absolute levels of pay and the low status and value given to industrial management in our culture. People of my generation and older had to go to American business schools to be trained in management. To this day, a middle manager in Britain earns half to one-third of the salary of his equivalent in Europe, and the tax reliefs in the Budget will not do much about that.
Our values as a society are such that the way to make a high salary and enjoy esteem in Britain is to avoid industry altogether and go into the public service, banking and finance, and the learned professions. A few years ago, the Diamond Commission showed that in local government there were five people per 1,000 employed earning over £8,500 a year, seven per 1,000 in the professions, 13 per 1,000 in central Government, 17 per 1,000 in banking and insurance, and only three in 1,000 in manufacturing industry. The


issue is as much about the way our society works as about taxation.
Industrial management has a low esteem, and it is much more significant, in my view, than the incidence of income tax as a deterrent to raising the quality and performance of management. After all, the high road to power, the high road to influence and income, in Britain is to read classics or history at Oxford, enter the administrative Civil Service and get closer to the Treasury—not to study engineering or accountancy and join a manufacturing company.
These tax reliefs go indiscriminately to importers as well as exporters, to judges and to Civil Service mandarins. While on the subject of exporters, I point out that a report in the Financial Times of 27 June spoke of a " disquieting " slowdown in British exports to France—a nearby market in which we might expect the new dynamism soon to take effect. Our deficit in trade with France is rapidly widening. The reasons adduced by the British Chamber of Commerce in France were
 failures to honour delivery dates, to respond to letters and to produce relevant literature".
These, the report states, " are still too prevalent ". The report continues:
 Mr. Robin Ward, president of the chamber, said that the image of bone idle' British companies was becoming a serious factor which would be ' terribly difficult' to reverse.
I really cannot see that giving middle-income sales executives a few pounds, or company chairmen thousands of pounds, will guarantee that they will reply to letters or produce relevant sales literature if they are not doing so now. The failure to meet delivery dates must be due, as much as anything else, to capital investment, which is now being discouraged by the Government through high interest rates.
I therefore doubt the tax incentive argument. The proposed tax arrangements amount to a gigantic productivity deal for management, and a lot of less deserving people as well, with payment in advance—an arrangement always vigorously opposed by Conservative Members. Unfortunately, we also get in advance the inflation inherent in the Bill.
Then, of course, we have to consider the condition of the economy in which these tax reliefs will take effect. My right hon. Friend the Member for Leeds, East

(Mr. Healey)—in a speech last week in this Committee on the regulator clause. which neatly skewered the Chancellor, the Chief Secretary and Professor Friedman in the most succulent kebab—showed that the Budget was economic nonsense. The Government may not realise it yet, but lots of other people do. My right. hon. Friend quoted the Financial Times survey of 2 July of consumer confidence. The survey suggests that VAT increases in the Bill clearly outweighed in consumers' minds the impact of income tax cuts. As the report states:
 The survey shows that the biggest switch from optimism to pessimism among consumers has come from among ABC-1 men—those in professional and executive jobs—who stand to gain most from the Budget's income tax cuts. Their consumer confidence index has dropped a dramatic 60 points—from a positive index of 27 per cent. to minus 33 per cent. in one month.
That is after the Budget.
So much for the new beginning promised by the Chancellor. A Finance Bill is as much a social as a financial document. It sets out the priorities among occupational groups and social classes. This Finance Bill gives heavy rewards to those who need them least, and very little to those in real need. It also sets the tone for pay bargaining, by giving enormous sums to the very well paid. This part of the Bill is divisive, unjust and provocative.

4 p.m.

Mr. Richard Wainwright: I should like to speak briefly to amendment No. 9. The fairly modest purpose of this amendment is to get, for the first time, an explanation from Treasury Ministers for this extraordinary drop in the higher rate of income tax. The Government have declared war, not, as we would wish, on income tax, but on the old concept of supertax. That is what the Government have tried to get rid of in the Finance Bill, and they have not yet done the House the courtesy of explaining just why they have made this extraordinary choice.
I agree that a rate of income tax of 83 per cent. on earned income was, to use an old-fashioned word, nonsense. When that was allied to even a modest amount of income from savings it produced the absurd rate of annual tax of 98 per cent. which could scarcely be justified for long


in a free society during peace time. I readily agree—indeed, I have advocated it—that there is a need to bring the top level of tax down quite markedly. But for it to come down in one fell swoop by such an extraordinary margin seems provocative and unreasonable in a Finance Bill which does very little—as the Committee has just been told, quite correctly—for middle management, let alone the average and lower-paid worker. It is an extraordinarily provocative thing to do prior to what is bound to he one of the most difficult winters that this country has ever faced in terms of pay negotiations, because we appear to be virtually defenceless. Although not a vast sum in financial terms, the cut in income tax will be one of the most provocative elements in discussions at plant level this winter.
The alternative amendment which the Liberals have put down for debate provides for a more modest, though still significant, scale of reductions, which is intended to remove what might fairly be described as the penal element in income tax; to get away from what is virtual confiscation but still to keep the reduction in scale with the fairly modest direct tax reliefs in the rest of the Finance Bill.
I make no secret of the fact that the Liberals' first objective is to try to draw from the Government some detailed justification for the proposals that they have made.

Mr. Robin F. Cook: In this amendment we come to the central part of the Finance Bill. When the Chancellor of the Exchequer introduced his Budget to the House he referred to his cuts in income tax as the keystone of his policy. I find that a particularly fitting metaphor, because it is, after all, placed on top of the foundation to which each of our constituents has contributed through the increases in VAT provided for in other parts of the Bill.
As other hon. Members who have contributed to this debate indicated, what this clause does, in conjunction with the clause on VAT that has already been debated, is to transfer the burden from income tax to indirect tax and thereby increase the net burden on all income groups below £10,000 while providing very generous decreases in the burden for those with income over £10,000.
It is a great pity that the Prime Minister abandoned her practice of walkabouts in shopping centres. A month ago at Question Time I remember the right hon. Lady referring, in most moving terms, to an elderly lady whom she had met during a walkabout. The right hon. Lady referred to the fact that the person she had met had an income of £24 per week and paid tax at £1.25 per week. I remember, as I am sure will every other hon. Member of the Committee, the strong, passionate and sincere tones in which the right hon. Lady told the House on that occasion that that lady should not have paid tax at all.
There is one conclusion only to be drawn from the reduction in income tax rates contained in the clause and the increases in VAT contained in the clause which we have already disposed of, namely, that that elderly lady will now pay more tax than she did on the day she met the Prime Minister. I entirely agree with the point raised by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), that it is no wonder that the right hon. Lady has abandoned her walkabouts. If she were to return to them her advisers would take care to see that she did not return to the shopping centre where she met the old lady.
I do not pretend that there is not a problem with income tax. A very severe problem has arisen with our income tax structure in the last five or ten years because of inflation, fiscal drag and, in particular, the collapse of taxation in the company sector. That last matter is never referred to by Government Members. However, if we make an international comparison—of which Conservative Members are so fond—we find that in Britain the proportion of tax raised from the corporate sector is lower than anywhere else in Western Europe, North America or Japan. It is lower than anywhere inside the OECD countries.
If one looks at the figures within this country, one finds that of the 20 most profitable companies last year, 13 did not pay corporation tax. I know that Government Members do not wish to know that, but that is precisely why the average wage earner has found that his income tax burden has increased.
I do not deny that the increase in the tax burden in the last five years is one of the


features that contributed to the unpopularity of the previous Administration. It would be very foolish for me, or any of my hon. Friends who campaigned on doorsteps, to deny that the increase in the tax burden for the average wage earner was one of the major reasons why we did badly in the general election. What is now getting home to the electorate is that the Conservative Party, having gained power by exploiting that grievance and obtained office on the pretext that it would do something about it, has now piled even more tax on the average wage earner whilst giving substantial hand-outs, paid for by those increases in tax, to the higher-paid section of the community, which, arguably, is the one group that has not had its tax burden increased over the last two or three decades. The evidence that that has been discovered by the electorates becomes more apparent with each passing day. Only today there was a new poll in the Glasgow Herald which showed that the Labour Party in Scotland has added 10 points to its position in Scottish opinion.
We read in the same paper the anguished cry from the hon. Member for Aberdeenshire, West (Mr. Fairgrieve)—indeed, one might describe it as a scream—who, in his capacity as chairman of the Conservative Party in Scotland, is quoted as having said
 The Labour Party has done nothing to deserve this ".
That may or may not be true, but the fact of the matter is that the Tory Party has thrown away its support by the way in which it has arranged the tax cuts to fall beneficially on its own selected supporters and with severity on the average wage earner.
I have sat through the last few days of the sittings of this Committee and have heard about the grievous poverty to which the top few of our population have been reduced by the penal rates of taxation. I think that all hon. Members have heard this, accompanied in the background by the faint plucking of violin strings.
Since our last sitting, I have been in the Library and have looked up Economic Trends. I urge that as a salutary process on any hon. Members who have been listening to the speeches over the last few days. In Economic Trends, they will find a table on page 88, which shows that if one takes the top half of the top 1 per

cent. of income earners—I do not think that we could take a sample less than a half of 1 per cent. without risk of statistical error—in the last year for which figures are available, which is 1976–77, that proportion paid on average only half its income in taxation. The average rate of tax on the top half of the top 1 per cent. was a mere 50 per cent.
That puts into perspective some of the figures about which we have heard. It arises because of the very generous tax relief that we still offer on things such as insurarce policies and mortgage allowances. Such tax relief is of greatest value to those who pay the highest rate of taxation. Hitherto, it has been justified because of the progressive rate of our income tax structure, but now that we are dismantling that progressive taxation system I see no sign that we will reexamine those generous tax reliefs.
In the many papers emanating from the Government, I see many references to cash limits on subsidies to local authority tenants and local authority expenditure. However, I see no reference to cash limits on tax relief to mortgagors or to those who pay insurance premiums.

Mr. Robert Kilroy-Silk: Before my hon. Friend concludes this most important point, will he not also make the same point in relation to tax-free perks, which make up a considerable proportion of the real income of most executives?

Mr. Cook: I take my hon. Friend's point entirely. I shall not pursue it, because I am anxious to continue with my own argument. However, I am sure that my hon. Friend will deal with that matter when he addresses the Committee, in what I am sure will be a lengthy and serious debate.
Another reason advanced by the Conservative Party why we must have these tax cuts is that apart from the fact that this penal rate of taxation forces top earners into poverty, the distraction of that poverty prevents them from the vital task of invigorating business and industry. The Chancellor of the Exchequer specifically made this point when he introduced the tax cuts, when he referred to the fact that the high rates of income tax on the upper bands had contributed to the lacklustre performance of British industry. In other words, with this cut


in the tax we will liberate the business man from his chains, and with one galvanised bound Britain will enter the land of incentives and wider opportunity.
That has been asserted by Conservative Members. We have never been offered any proof, not even the anecdotal proof that passes for evidence in this Chamber. I find it interesting that Conservative Members are not willing to test their belief by any serious investigation. After all, we have had Royal Commissions on income tax before. Until this Government came into power, we even had a Royal Commission on the distribution of income and wealth. The basis on which one could test the assertion was there. It has not been put to that body. We have been left with measures being introduced on nothing more than the retailing of the prejudices of the lounge bar.

Mr. Donald Anderson: Does it not go further than that? Not only is there no proof in favour of that assertion; evidence exists—namely, the evidence of the practice between 1970 and 1974—that is against it, when the right hon. Member for Sidcup (Mr. Heath) went on his knees pleading with industry to invest more.

Mr. Cook: I agree with my hon. Friend that there is very little evidence in history to support the contention being argued by Conservative Members. Indeed, when I look around I see very little evidence in the current situation. There is no obvious scientific fact to which one can point to buttress the argument that, for example, the British should be working longer hours. The irony is that over the last five years the number of hours worked in overtime has been increasing at the same time as the income tax burden has been increasing. If Conservative Members were correct in their thesis, one would expect to find precisely the reverse correlation.
4.15 p.m.
I know that Conservatives will tell us that that is not what they mean—that they do not have in mind people working additional hours of overtime. The argument will be that they have in mind the quality of work of senior management, which will be stimulated to fres effort

by these tax cuts. Indeed, a circular that I and, I think, all hon. Members received from the British Institute of Management calls upon its members to respond to the tax cuts with
 enterprise, strategic boldness, personal effort, and leadership.
I find it very difficult to credit that there can be managers in British industry possessing the qualities of
 enterprise, strategic boldness, personal effort, and leadership 
who will discover these for the first time because the top rate of income tax has been cut from 83 per cent. to 60 per cent. I doubt that even the Treasury Bench agrees with that. Last Thursday the Chief Secretary to the Treasury regaled us with a speech which turned mainly on his own view of economic predictions, which he termed " agnosticism ". It is only fair to point out to the Chief Secretary that one of the people to whom we will be looking for a particularly galvanised response to these tax cuts is the permanent secretary in his own Ministry, who not only received a £3,000 rise last month as a result of the top salaries review but, as a result of this Budget, will be paying £400 a year less tax on the increased salary that he is receiving. If the thesis being advanced is that this will give incentive and advantage and new opportunity, so that the permanent secretary can show
 enterprise, strategic boldness, personal effort, and leadership ",
what prodigy of results can we expect from the Treasury in the future?
I know that the Chief Secretary does not expect that for one minute. I doubt that any hon. Member expects that for a minute. After all, we do not even expect it of ourselves. Two days from now we will debate the increase in our salaries. That may well go through. Does any hon. Member really expect his efforts, or the efforts of any of his colleagues, to show new leadership or boldness as a result of that increased incentive? Does any hon. Member expect our speeches to become even more witty, or—God forbid—even longer, as a result? Does any hon. Member expect that we shall see the Temple barristers descend here before 4 p.m.? The answer to each of those questions is " Of course not ".
At this point I can pray in aid—which I did not expect to be able to do—the


right hon. Member for Down, South (Mr. Powell), who has a most interesting article in this morning's Guardian, which ends with the following fascinating sentence. It almost seems to have been written as a text for our debate. It states that
 In proportion as the financial remuneration rises, the marginal motivation of all other kinds must fall ".
On the basis of that, I find it very difficult indeed to comprehend the faith of Conservative Members that this cut in tax rates will result in the galvanised leap forward in which a thousand executives will bloom.
I may be wrong. Perhaps British business is crammed with talent, locked up in sullen bosoms which nursed their wrath at the low pay that they received net of tax. It may be that our golf courses are crowded with executives who can be coaxed back to their rooms by this tax measure. These things may be true, but it is only fair to warn the Treasury Bench that we will be watching to see whether it happens.
We were promised by the Chancellor that these cuts marked a turning point. Very well. We will be watching to see whether that turning point has arrived. We will be watching to see what the consequences are. Our constituents will also be watching, because, after all, they are the people who will have to pay the increases in VAT to make all this possible. If they find that they have been led up the garden path, and that this is no more than a pretext to provide handouts to the few friends and masters left to the Tory Party, Conservative Members will not be forgiven, nor will they deserve to be forgiven.

Mr. Dudley Smith: The hon. Member for Edinburgh, Central (Mr. Cook) referred to the British Institute of Management. I declare an interest as an honorary supporter of that organisation, as, I believe, the hon. Member for Norwich, South (Mr. Garrett) has been in the past.
I should also declare an interest as a management consultant, as I believe the hon. Gentleman was, too. As has been said, the speech of the hon. Member for Norwich, South was something of an essay but it was none the less interesting. Leaving aside his political argument, the

nitty-gritty of what he was saying was that salaries at the top end of the range are too high. He may be right, but we should look back and consider why that is so. It is because of the penal rate of taxation that has been imposed, particularly over the past five years under a Labour Government. That point was grudgingly admitted by the hon. Member for Colne Valley (Mr. Wainwright) when referring to the highest rate of taxation.

Mr. Kilroy-Silk: Those salaries must come down.

Mr. Smith: There may be a case for saying that at the top end salaries should not be increased so much, but what we should be trying to achieve is a situation where people receive real salaries from which they have a real income. The Government want to establish the right rate for the job throughout the range of salaries. At the lower end people are unable to look after themselves, are not capable of earning reasonable incomes, or are retired or disabled, and they must of course be protected.
The rate of taxation over the last few years has amounted to penal confiscation. Labour Members are doing themselves less than justice by ignoring the fact that the people in the £25,000 to £40,000 or £50,000 a year salary range are almost exclusively employed by companies. They are subject to the rules of those companies and can be dismissed far more easily than can Members of Parliament. We come up for dismissal or reaffirmation every four or five years, but unless these people " deliver the goods " they will find themselves in the firing line. Some may have equity in the companies concerned, but over the past few years that has not produced great dividends.
There may be a case for reducing the highest level of salaries provided that the take-home pay for those individuals is equatable with the responsibility and initiative that they are required to show. That also applies to the middle income groups. The hon. Member for Norwich, South said that the £10,000 a year man would from now on begin to do well, but surely the hon. Gentleman agrees that salaries in British industry in that range are too low? We should have a more equitable system compared with the Common Market countries, and


initiative and responsibility should be properly rewarded.
There is an interesting debate in the press, which has not yet been announced in the House, that perks should be shorn by the Government. There is a strong argument for looking at perks, particularly company cars, but perks can be cut only if the vast majority of the salary is going to the individual. The practice of giving perks, especially company cars, has grown up only because of the severe rate of taxation imposed during the postwar years in order to get a response from middle and senior management. It may be possible to phase out perks because of the new atmosphere created by my right hon. and learned Friend the Chancellor and his colleagues at the Treaasury.
The Treasury should also look closely at moonlighting. From what I read and hear, it is costing the country thousands of millions of pounds. People are doing jobs on the side on which they are paying no tax, which is strongly resented by those imprisoned by the system, working for an individual company or organisation, who have to pay tax by PAYE. They resent seeing the man down the road getting two or three incomes and not declaring them. That again stresses the need to return to proper incomes for people in all types of work—the shop floor worker, the manager and the worker in the public services. People must have a fair return on what they earn and not receive special benefits or privileges.
In this Committee we perhaps do not realise the level of incomes and salaries earned outside. In the past 10 days there has been much controversy about salaries for Members of Parliament, and, as the hon. Member for Edinburgh, Central said, we shall be voting on that matter in the next 48 hours. I overheard a conversation the other day between two civil servants. A principal now earns £15,000 a year and an assistant secretary £17,000. I have not checked that, but I believe it to be right. Those are large sums of money. Principals sometimes play a leading part in the offices of junior Ministers who are not earning anything like that sum. We tend to underestimate the number of people doing a logical, worthwhile and good job but who are earning between £10,000 and £20,000 a

year. We shall not achieve anything by keeping down salaries and incomes.
The Government must watch inflation closely but at the same time move towards a policy of higher real incomes for individuals. Those people who cannot look after themselves by initiative or opportunity, through age or disability, must be protected, but those who are able must be allowed to progress and earn larger incomes and keep more of them. We should not all the time be seeing how much the State can take from salaries. That is a profitless exercise. If the hon. Member for Norwich, South looks into his heart he must agree that, although some enmity might arise from higher incomes, if people in the higher and middle salary range are allowed to keep more of their money, individuals will strive harder and do a better job. At the end of the day the country will then be better off. We are on the right road.
We are members of the European Economic Community, whether we like it or not. Regressive taxation is not the right answer. We should not say that because an individual is earning much more money he should be curbed. That creates the wrong atmosphere. Although many people are not enchanted by the present tax cuts, they must understand that as the year progresses they will be getting responsible and worthwhile increases in pay. Inevitably, because of those increases, they will be keeping more of the money that they have earned, because the base now is so different from what it was before the general election on 3 May.
Given those circumstances, I believe that the working population as a whole—that includes everyone; those who work include company chairmen and those right down the line to the shop floor, even those doing the most menial jobs—will feel and understand that there is a better opportunity now than there was before, and that they can possibly respond rather better than they have done in the past.

4.30 p.m.

Mr. Kilroy-Silk: We are debating, suppose, the results of what, by any standards, can only be described as the most colossal and disreputable con trick that was ever perpetrated on the British


electorate. What the Conservative Party was saying during the entire period of the election campaign—certainly by my Conservative opponent and by various Tory spokesmen who went around my constituency in an attempt to dislodge my limpet-like hold on it—was that we would have a new Conservative Government and that there would be tax cuts which would benefit everyone and for which no one would be required to pay the costs involved.
Indeed, hon. Members who are now Ministers were at that time denying our claim that the tax cuts promised by the Tory Party would result in a doubling of value added tax. We had the Prime Minister herself emphatically denying to the electorate at large that it was any part of her intention—nor, she said, would it be necessary—that a Conservative Government would double the rate of VAT to implement the income tax changes that the Tories had in mind, yet we are now confronted with a virtual doubling of VAT, although to 15 per cent. rather than 16 per cent.
What the Conservatives have done, as the Conservative Party did during the election campaign, is to demean British politics. This is one of the most important features in this debate—it should be an important feature—but it is not very often mentioned in the context of talking about marginal rates of taxation or VAT and the important consequences that both have on the economy and on working and non-working people in our society.
We are all concerned—or we should be—about the principles that lie behind the Conservatives' politics and about the standards of public behaviour of all of us individually and of parties in the House of Commons collectively. What the Conservative Party did in the election campaign was to add to the cynicism with which people have traditionally regarded politicians and the two major political parties. The Conservatives have damaged, in a very dangerous way, the integrity of not merely their own party—they have damaged that on previous occasions; perhaps more significantly in the past—but politics generally, by behaving in that deliberately callous way—going out and purchasing votes at the price of cheap promises which they knew they had no intention of honouring.

Mr. David Winnick: Does my hon. Friend agree that a number of popular newspapers have allowed themselves to be used by the Conservative Party and, indeed, that they prostituted themselves during the election campaign for the Conservative Party? That was illustrated today by comments on the headline story of the Daily Mail during the election campaign.

Mr. Kilroy-Silk: My hon. Friend is quite right, although he is not surprised by such behaviour on the Dart of our predominantly Tory press in an election campaign. It was ever thus, and no doubt it will be so for a long time ahead while we have proprietorial control of newspapers and while they are largely the friends and supporters of the Conservative Party. That is what one has always expected, and what one anticipated. As my hon. Friend rightly points out, it was demonstrated clearly by the kind of behaviour that we saw during the election campaign on the part of the Daily Mail. Every one of those 12 " lies " has now been nailed to have been the truth. But that is one of the consequences that we must bear.
One of the most unfortunate aspects of this Budget and its tax changes is its unjust nature and the way in which it affects different sections of the community disproportionately. As my hon. Friend the Member for Norwich, South (Mr. Garrett) said, it is very much a class Budget, with all the old prejudices and the bias of the Tory Party presented, clearly and openly, for public display. After all, as my hon. Friend the Member for Edinburgh, Central (Mr. Cook) clearly pointed out, as have others on the Labour Benches time and again in our debates in this Committee—and it has now been echoed in the Tory press, which recognises the dangers of the present Administration—someone must be earning £10,000 a year or more to benefit from the Government's fiscal changes in the Budget. That is an extraordinary state of affairs. It cannot in any sense be defended on the ground of justice.

Mr. Anderson: Perhaps my hon. Friend will help me on this point. In that figure of £10,000, has account been taken of the certain increase in mortgage interest rates, which will be a direct result


of the increase in the minimum lending rate?

Mr. John Garrett: It is rising every week.

Mr. Kilroy-Silk: My hon. Friend the Member for Norwich, South, who has intervened from a sedentary position, is wrong. It is not rising every week; it is rising every day. The consequences of the Budget and of the abolition of the Price Commission, whereby we have profiteering, and prices going sky high, will be with us for several more months. Many other people will have to earn significantly larger sums than £10,000 to benefit from the Budget.
However, let us take the Government at their own figures. Let us look at the £10,000 a year figure. It cannot—no Conservative Member has attempted to defend this—be considered to be a just Budget when one must earn £10,000 a year to benefit from it. Certainly very few, unfortunately, of my constituents earn £10,000 a year. I suspect that none of them in Kirkby even approaches the figure of £10,000 a year. Many of them are unemployed. Many are heads of one-parent families. There are several thousands of pensioners, and many thousands of sick and disabled, yet every one of those groups is being asked to pay increased prices because of the 15 per cent. rate of VAT, increased petrol prices and the effect that they will have on other commodities, and increased prices generally, because of the abolition of the Price Commission. They, the poor, the disadvantaged and the deprived, who will get no benefit at all out of the tax concessions, are being asked to subsidise the tax handouts to the already rich and wealthy.
Surely that is an indefensible situation. It is a heavy price to pay to have the rather dubious pleasure of welcoming home the Bee Gees, the Humperdincks and all the rest for whom the present Chancellor's heart bled in previous debates in this Chamber when the Labour Party was in Government. Yet those are the very people around whom he seems to have geared his whole Budget strategy, those few people who are affected by the higher bands of income tax, who are leaving the shores of this country—good riddance to them if that is

their only motivation—and he seems to have devised his Budget strategy to bring them back to this country.
I take great exception to my constituents, particularly those who are deprived and disadvantaged, having to bear the burden of the increased tax concessions that they now, in effect, are having to pay to line the already rich pockets of the wealthy, the nonentities and the parasites such as the Humperdincks and the Bee Gees.
It is not only that. As the hon. Member for Warwick and Leamington (Mr. Smith) pointed out quite fairly, salaries previously were large because one attempted to compensate for the high rates of taxation. If that is so—and there may be some evidence to support that—one would now expect those salaries to come down, but we get no cries from the Conservative Benches on that issue. Nor shall we get any suggestion from the Minister of State—perhaps he might deign to answer this question later—about whether we shall now have an attack upon the whole panoply of perks which disfigure our corporate life. As the Minister of State has previously said many times in this Committee, there is a proliferation of perks—company cars, company housing, cheap mortgages or loans, private medicine, private education, and a wide variety of things. These were justified in the past—at least, the justification for them was given—by the assertion that they had to be given to employees to escape various pay policy curbs or the high rates of taxation.
Now we do not have a pay policy. We have the Tory free-for-all and lower rates of taxation. Are we, therefore, to see a major onslaught on corporate perks? I believe that such an onslaught is required if the objective of galvanising British management, encouraging it to adopt a more entrepreneurial spirit, is to be achieved.
The way in which many of our middle and higher managers are cosseted in a cosy corporate world cannot be said to be conducive to their being outgoing, adventurous, enterprising or entrepreneurial. They are too firmly fixed with the company car, private medicine, pension schemes, private education for their children and all the rest, in a safe and comfortable world, ever to become the


new, galvanised, economic men the prototype of whom we are presented with in the Budget Statement.
It is also wrong of Conservative Members to attribute their motives and feelings to other people. As many of my hon. Friends have repeatedly said, the Budget is predicated on the basic premise that man is motivated only by economic interests or, in their terms, by greed. They should not assume that everyone else is like them, motivated only by economic interests or greed. There are many people in our society, in industry, commerce and other areas, including the House, who are certainly not motivated exclusively, and perhaps not even primarily, by material reward but who have other motivation. It may simply be straightforward job satisfaction. They certainly will not be motivated to work harder, produce more, export more or whatever by the tax cuts which the Government have handed out to them at the expense of ordinary working men and women.
The tax cuts may even be counterproductive. If people with high incomes are motivated by economic interest and greed, substantial tax concessions in the Budget may make them feel that they do not have to work harder, because the kind of things that they would have worked harder to buy have now been given to them freely through the massive tax handouts from the Chancellor of the Exchequer. En that sense the Budget could act as a disincentive to all those who will receive significant sums of money as a result of it.
More damaging even than the unfairness of the income tax changes, and the fact that they are potentially counterproductive, is the effect that they will have upon the quality of our public services. I take great exception to the fact that more of my constituents will have to be unemployed in order to pay for the tax handouts to the already rich. I take even greater exception to more of my constituents now being made unemployed in order to carry the Budget strategy through. That cannot be defended. Yet it is precisely what the Government are advocating. They are complacently expecting and accepting, without any defence, without any rationale, that more of the people in the deprived areas, such as Merseyside, the North-West and the Northern region, where employment

opportunities are already seriously eroded and employment is precarious at best, will now be subjected to the rigours of a very different economic system and that far more will be in the dole queue.
Apart from that, as we have already seen from the pronouncements of Tory local authorities throughout the country, we shall witness a massive erosion in the quality of our public services. There will be longer waiting lists and longer waiting times at our hospitals. There will be fewer items such as life-saving kidney machines. There will be fewer teachers, home helps, health visitors and community nurses. There will be fewer libraries or no libraries. There will be no school books in some places, and no school meals, or there will he economic charges for school meals.
A whole variety of new measures has been announced in the past few weeks by various Tory local authorities, all in order to finance the Government's tax handouts to the rich. That is indefensible. The people who are really deprived will not only have to pay for the tax handouts. through higher prices, increased value added tax, and so on, but will be discriminated against yet again in a callous and vindictive fashion, finding that they have reduced or no public services, because the Chancellor has deemed it necessary to lop hundreds of millions of pounds off public expenditure to finance his Budget strategy.
4.45 p.m.
That brings us to the crux of the question whether it is right and proper to reduce income tax in the way that is proposed. I do not object to lower rates of income tax, certainly not in principle. I am not against tax cuts per se, but I am fundamentally opposed to tax cuts of the kind proposed at this time in our economic history. It is acceptable to finance them out of economic growth or an increase in gross national product. It seems to me totally wrong and misguided to finance them, as the Chancellor is now doing at a time of nil economic growth, out of reductions in public expenditure and therefore of the quality of life, and out of increases in prices, which will affect the already low-paid, the unemployed, the sick and the disabled.

Mr. Dudley Smith: Well over 1 million people have been taken out of taxation


by the Budget. Does the hon. Gentleman object to that?

Mr. Kilroy-Silk: I dispute the hon. Gentleman's figures. They are hotly contested on both sides of the Committee, but I shall not become involved in that argument. I accept that it is desirable to take large numbers of low-paid people out of the tax net. I and some of my hon. Friends who are present today were vociferous in arguing that case when we were in Government, but I am not arguing that point now. My point is simple and much more straightforward. It is that there cannot much of a rationale—certainly, there can be only rationalisation—for any suggestion that we should finance the present tax cuts, when we have nil growth, out of inevitably reduced public expenditure.
I honestly and sincerely believe that if confronted with a straightforward choice between having more in their pockets as a result of tax cuts and reduced public services and a reduction in their quality, most people would choose not to have a reduction in income tax. They consider it very important that we should have a proper and efficient Health Service, that waiting times and waiting numbers should he reduced. They believe that people should have access to proper education, proper housing, proper street cleansing and libraries, to all those important things which mean a great deal to the individual because they meet him at his doorstep. They are concrete and peculiar and personal to him.
When the individual realises and accepts the connection between income tax and the public services that he enjoys, he is invariably—unless, like Conservative hon. Members, he is selfishly motivated by greed—prepared to accept the reasonable price that he is asked to pay to ensure that we have adequate public services. Certainly that applies to the majority of my constituents, who, I accept, perhaps benefit disproportionately as a result of public expenditure and lose disproportionately as a result of the cuts in personal taxation.
In the past few days we have seen the Labour local authority of Sheffield threaten to take discriminatory action against one part of its community, the people living in the Conservative constituency

of Hallam. I want to put on record that I very much deplore that attitude, but I also want to put on record that the authority is only doing what the present Government have already taught it to do. It is following closely and clearly in the footsteps of the Government in their Budget strategy.
The Conservative Government have. unfortunately, shown the city of Sheffield, and others who may follow in its footsteps, the way forward. The Government said clearly from the very beginning of their period in office " We shall nationally discriminate callously against Labour voters and ordinary working men and women. We shall discriminate against the already poor and the already deprived and disadvantaged. We shall do it in order that we may ensure that our already wealthy friends can be subsidised even more by larger tax handouts from the Treasury."
The Government will bear a heavy responsibility for the political unrest that may follow from Sheffield and elsewhere. The responsibility for the consequences rests on the Conservative Benches, and it should lie heavily on the shoulders and consciences of Conservative right hon. and hon. Members.

Mr. Ralph Howell: I welcome, in general, the proposals in the Budget. I shall be critical of certain aspects, and on one aspect I shall not be able to hide my disappointment, but the Chancellor of the Exchequer should be congratulated on his boldness in cutting drastically the higher rates of income tax and on the considerable switch that he has made to indirect taxation. The country fully understands the good sense of this step. I hope that it is merely a foretaste of better things to come.
I was amazed to hear the remarks of the hon. Member for Norwich, South (Mr. Garrett). It seems that the Labour Party will never learn that the people of this country are fed up with high income tax rates. That is what is holding us back. Until we break out of this impossible situation, there is no likelihood of our having a healthy economy. It simply does not pay to work.
A manager in my constituency, only 10 miles from the constituency of the hon. Member for Norwich, South, manages poultry farms in North Norfolk and in


France. The average worker whom he employs in France earns £84 a week, he pays about 9 per cent. in social charges, and he finishes up with £73 weekly spending power. The average worker employed in my constituency earns £77 a week, pays £14 income tax, with an additional sum in national insurance, and finishes up with a weekly spending power of £53. The French worker works only 42 hours a week, the British worker 46 hours. No trouble is experienced in getting people to work at weekends in France. In this country one has to beg people to work at weekends. We should not continue to believe that we are not the highest taxed country. All the facts bear out that we are the hightest taxed, certainly in Europe.
Before the cuts in the Budget, the average family man reached 40 per cent. taxation and was charged national insurance on pay of £2,500 a year. In the United States, that position is not reached below a salary of £16,000 a year, and in Germany below £17,000 a year. We are the highest taxed of almost any people in the world. That is the basic trouble. Labour Members are in opposition because people were determined to see a change. Those people understand the good sense in the Government's actions.

Mr. Kilroy-Silk: The hon. Gentleman knows that that is nonsense.

Mr. Howell: It was impossible in a Budget that had to be put together quickly for the whole question of co-ordinates of taxation and welfare to be covered, but there are two aspects of the Budget which disappoint me. One is that the Government did not cut the standard rate of income tax more. I should have liked to see a cut at least to 25 per cent. My hope is that we shall not be satisfied with 25 per cent. The rate needs to be cut to at least 15 per cent. in due course. We shall not get out of our Socialist State by cutting the rate merely to 25 per cent. Let us get it down to 15 per cent., bearing in mind that the standard rate in America is 14 per cent. and in France 5 per cent. We should also remember that the tax thresholds in those countries are higher than they are here.

Mr. Kilroy-Silk: The hon. Gentleman is proposing a revolutionary strategy. It is making the Minister of State quake. A 15 per cent. tax rate would involve massive financial resources. How would the

hon. Gentleman propose to finance that rate?

Mr. Howell: There are many ways, which I shall not explain today. I want to continue with my theme. We need to look over the fence. I do not claim to be a financial wizard. I am a farmer. Every day of the week, like any good farmer, one looks over the fence to see what one's neighbour is doing. Why do we insist on acting differently from successful countries? The most successful countries have much lower income tax rates, which do not cut into people's pay at low levels as occurs in this country. We should learn from others. Labour Members are much too blind to this fact.
I should be grateful if the Minister would explain why social and welfare benefits have been increased to a greater level than the amount that people can expect to gain in tax cuts. This is a pity. It will aggravate the poverty trap and aggravate the unemployment trap. Anyone earning under £100 a week will be lucky if he is £3 a week better off as a result of the tax cuts, yet single people will receive £3·80 in increased benefits and a family with two children will receive £6·15. I should like an explanation of why this step was thought necessary and sensible.
Child benefits for those who work will remain at £4 a week. For those who are not at work, the benefits will be increased by 85p, to £5·70. The poverty trap will continue to be deep. Until we tackle this problem and create a situation where it is always more profitable to work than not to work we shall not solve the economic ills of this country. There are 800,000 vacancies waiting to be filled. It is impossible for the Post Office to recruit people at £100 a week. In the London area the situation is even more absurd. There are 360,000 vacancies in the South-East of England and only 260,000 people are unemployed. There are masses of jobs waiting to be filled. Until we alter our taxation and welfare system, and until these matters are co-ordinated so that it is worth while to work and people are not taxed at such low levels, we shall not solve the problem of people refusing to work.
My hon. Friend the Member for Warwick and Leamington (Mr. Smith) talked about moonlighting. This black economy, as it is called, is increasing all


the time. It will continue to increase until much bolder action is taken on the lower rates of taxation. I recognise that the Government were unable to make fundamental changes within the few weeks available to produce the Budget, but there will be no excuse in April 1980. There is no sense in following this Socialist road while our tax rates are at their present levels. The sooner we turn from that course the better.
5. p.m.
I propose that, no later than 1980, all income should be treated alike for tax purposes. I fail to understand why social benefits should be exempt from taxation. This causes the huge anomaly of tax refunds. Those at work pay about £700 million a year in tax rebates, and that should go on no longer. It discourages people from working.

Mr. Nick Budgen: I wonder whether I can help my hon. Friend further to refine his thoughts. Does he really mean that all income should be treated in the same way, or simply that short-term benefits should be taxable?

Mr. Howell: I am saying that wages and benefits should be classified as income. In 1949 the Attlee Government exempted short-term benefits from taxation. Pensions are taxable, but unemployment and sickness benefits are not. That is what causes anomalies.

Mr. J. W. Rooker: The hon. Member is making an important point. Does he accent that to put into operation what he is advocating would require a massive rise in personal allowances—that is, the tax threshold—or the poverty trap would be made worse? Secondly, after what he has just said, does he intend to vote for the clause exempting from tax the other half of the war widow's pension?

Mr. Howell: I accept that we should raise tax thresholds considerably. All income should be treated alike for tax. We have heard a great deal about the Rooker-Wise amendment, which in fact is meaningless.

Mr. Rooker: Tell that to my constituents.

Mr. Howell: The hon. Member has gained a good deal of credit from that, but until we do something more dramatic and raise tax thresholds in line with the national average wage we shall not solve the poverty trap. The average wage is now about £4,000 a year. If wage inflation is 10 per cent., thresholds will need to be raised by £400 in one jump to remain static.
I hope that the Government will take my suggestion on board. Of course it will mean considerable cuts in Government expenditure, but that is why we change Governments—because we want to change these things in a major way. That is what the British people want. I hope that the thresholds will be raised well clear of supplementary benefit levels, thus eliminating the need for family income supplement and all that nonsense. I hope that in due course we shall reach the target of a starting rate of 15 per cent. and a top rate of 50 per cent.
There is another necessity among the reforms for which I hope in April 1980. All child support should be uniform. Why should a person who works receive less child support than someone who does not? This is another area which deepens the poverty trap and locks into unemployment people who would rather be working but cannot afford to because of the crazy interaction of taxation and welfare.
It is vital to recognise the absurdity of the present system, which has grown out of a hotch-potch of make-and-mend in which all sorts of remedies have been tried. People have genuinely tried to solve our economic ills, but this will never be done until we completely abandon our present taxation and welfare systems and start afresh in a truly coordinated way.

Mr. Denzil Davies: Perhaps I might intervene briefly on amendments Nos. 42 and 45, which go together. I do not think that the hon. Member for Norfolk, North (Mr. Howell) will wish me to comment on his characteristically interesting speech. I say only that he gave the Minister of State a good deal to think about with his suggestion of raising the threshold substantially and cutting the income tax basic rate to 15 per cent. He did not go into how he would achieve


that, except that he favoured cuts in public services. I do not know what effect that would have on his constituency, which I understand depends heavily on such services.
Amendments Nos. 42 and 45 seek more than anything to probe the Government's intention about perks. The hon. Member for Warwick and Leamington (Mr. Smith) said that he now thought, as do many others on both sides of the politcal debate, that perhaps this was the time to look at benefits in kind.
The original argument against doing anything against perks, as we tried to do in the Finance Act 1976—it was a reasonable argument in some ways—was that the high top rates of tax led to greater use of this safety valve. Now that the top rate is 60 per cent. on earned income, there is no case for not legislating—not this year, because of the time limitation, but next year—to deal with the problem.
These amendments suggest one way of doing so. I am not saying that it is a perfect way—there are probably better ways—of providing that there should be a different rate of tax, but if the top rates are being reduced for money income, there is no reason for reducing them for benefits in kind—for money's worth income, to use the wording of the income tax legislation.
We now have a real problem, which is most visible in the case of motor cars. I know that the value of cars is taxed to some extent, but the scale rates—as we recognised when we introduced them—are not equivalent to the total value and worth of the car to the individual. Probably 98 per cent. of all Rolls-Royces are not bought and paid for by those driving or being driven in them. Often, they do not provide their own petrol. The Minister of State will know the loophole in regard to petrol.

Mr. Budgen: Does the right hon. Gentleman agree that one of the problems, now that the State is in effect the major manufacturer of motor cars in Britain, is that British Leyland would complain bitterly if the tax system were changed so as to make the purchase of large, expensive motor cars less attractive?

Mr. Davies: I accept part of what the hon. Gentleman says. When we considered

this question, representations were made from both sides of the motor car industry to that effect. About 98 per cent. of Rolls-Royces are perks, and about 95 per cent. of all other large cars are provided by companies or out of partnerships or self-employed income. This should not be allowed to continue, particularly when it involves the higher income bracket.
The Budget does nothing for those who earn less than £10,000 or 02,000 For those earning £12,000 and more it provides a definite benefit. The amendments seek to restrict that benefit to cash incomes.
I raised this matter with the Minister of State on Second Reading. He was under pressure at that stage, and he was not disposed to deal with the matter favourably. However, in an offhand manner, he said that he would examine the argument. With a characteristic wave of his left hand he gave a grudging commitment to consider the matter.
I hope that the Treasury will not be too grudging. There are two Minister of State in that Department. I do not know what the other one does. I suppose that he sits and thinks. Between them, I hope that they will deal with the problem.
There have been reports in the newspapers that the Prime Minister is not keen on such perks and wants to do something about them. I hope that we shall be given a definitive view, because Ministers have not yet said much about perks now that the top rate of income tax has been reduced to 60 per cent. I hope that the Minister of State will say that they will introduce the necessary legislation in the next Finance Bill.
One can contrast the Government's attitude to this matter with the zeal with which they say that in the next Finance Bill they will reform the capital gains tax and capital transfer tax systems. Let them attach the same urgency and zeal to this problem.
If the perks are not dealt with, the resentment created by the Budget will be even greater than it is. It will be seen that it has nothing to do with initiative, drive and private enterprise. It will be seen as an attempt to provide surtax payers with a tax cut.
We shall not press the amendments to a Division, but I hope that the Minister


of State will state clearly that action will be taken next year. There is no excuse for maintaining the present system now that the top rates of tax have been reduced.

Mr. David Crouch: I shall not detain the Committee for long. The right hon. Member for Llanelli (Mr. Davies) has returned to the subject of the amendments. I mean that as no criticism of the Chair, but as a slight criticism of how some hon. Members have wandered from the point. Perhaps it is a good thing that you, Mr. Weatherill, have allowed them to wander, because we are discussing the kernel of the Budget. It is the guts of the Bill.
We are discussing what was offered by the Conservative Party, honestly and freely, to the public. We asked them " Do you or do you not want a reduction in income tax at all levels—at the lowest level, in the middle and at the top?" The cut was offered not only to those at the top earning between £10,000 and £25,000 a year, but to the whole nation. It was up to the nation to decide between what was offered by the Labour Party, campaigning throughout the country with its packet of promises—

Mr. Anderson: Will the hon. Member give way?

Mr. Crouch: No, I shall not give way. I have listened to enough this afternoon. Perhaps I shall give way later. I have only just begun.

Mr. Anderson: Give way.

5.15 p.m.

Mr. Crouch: I shall in a minute. The hon. Member for Swansea, East (Mr. Anderson)—as has been said of me—is a fair and honourable man. He has taken some of the pep out of what I was going to say, but that is part of the art of this place. However, I shall work myself up again.
As we campaigned, the Opposition as they now are—and I exclude the hon. Member for Colne Valley (Mr. Wainwright), who sits in solitary refinement representing the Liberal Party—campaigned not to reduce income tax. That is extraordinary. I could hardly believe that members of the Labour Party campaigned against a reduction in income

tax, until I heard the hon. Member for Norwich, South (Mr. Garrett) speaking from the Opposition Front Bench. He has earned his place there.
When he spoke in government, he said that he spoke for management. He is acknowledged here and outside as somebody to whom we should listen because he knows what management is about, yet he suggested that management does not need the encouragement of lower tax rates. This afternoon he was advancing the policies of the Opposition and the alternative policies for running the country. Not only do the Opposition oppose the Government, but they produce alternative policies on which the country can decide. We heard ideas and philosophies from an hon. Member who is much experienced in the ideas of management. He said that a reduction in income tax was not an incentive to management.

Mr. John Garrett: I said that it was not proven that a reduction in income tax for those who have already made it to the top in management would be a great incentive. I attempted to show that the middle managers—the sales managers and export managers—upon whom we depend, and who earn £12,000 or £13,000 a year, get virtually nothing out of the Finance Bill. The Bill helps above all the company chairman who has already made it.

Mr. Crouch: That is typical of the con trick remark that we have heard in the last few days. We have heard it in particular from the hon. Member for Ormskirk (Mr. Kilroy-Silk). He has been advancing his individual ideas for the last five or six years, since he first declared his intention of becoming Prime Minister before long. The ranks for that job on his side of the House have become crowded recently.
I listened to the hon. Member for Ormskirk when we were debating an earlier clause. I listened to the claptrap and twaddle that he delivers now that he is in opposition. When he was on the Government side, he was more measured in his tones and more careful about how he attacked the necks of his own party's Front Bench. He sometimes threw caution to the wind, but since he has taken his place below the Gangway—although he occupies an honourable place there—he tends to shoot his mouth off. If that


offends the hon. Gentleman, I withdraw it. He says the most ridiculous things, although he is quite an intelligent person.
It is lucky that the hon. Gentleman is a Gangway removed from the Opposition Front Bench, because he does no service to his party. Hon. Members who are ranked behind today—and I exclude hon. Members of other parties who fit into another category—have a pretty high quotient of intelligence. Those hon. Members may be on one side or the other of the Centre, but the hon. Member lets down even the Left side when he talks such nonsense.

Mr. Kilroy-Silk: What nonsense?

Mr. Crouch: The hon. Member for Norwich, South explained to me in his intervention that he was really saying that perhaps the Budget had helped those paying the highest possible rates of income tax, although they do not need much help. I know many people who say that they do not know, and are not interested in, how much they earn. They say that their motivation lies in doing a good job. I accept that.
I do not believe that among middle managers there is no interest in what is their take-home pay. We are talking about the people who earn between £7,000 and £15,000 a year. That is the principal bracket, of which the average is about £10,000 to £12,000 a year. We are talking about our young managers who need an incentive to stay in management and make a success of it, whether they are on the employer side of industry or on the union side. One of our weaknesses is the poor level of management on the union side. That must be put right, and it can be done only by increasing the remuneration of managers in that discipline.
This clause offers an opportunity, and, as the Chancellor said in his Budget Statement, it is only the first step. We must remember that. As I listened to the Chancellor on Budget Day, I thought that he was taking a risk in what he offered to do to effect such a dramatic change of direction in the fiscal and economic management of this country.
I am a cautious man, like the hon. Member for Norwich, South perhaps and perhaps not so incautious as the hon. Member for Ormskirk. I should have been more cautious than the Chancellor

was, but I should not have been as right as he was in making this bold move. We now hear from the Labour Benches that this bold move is too much for them. Socialists today cannot take a bold Conservative move. They have become so reactionary that they cannot contemplate change, and they are supposed to represent the radical party. Even the right hon. Member for Down, South (Mr. Powell), who is one of the great reactionaries of this House, is capable of radical thought. He combines—in a schizophrenic way—this quality, and we know his reservations about the Budget.
There should be more hon. Members from the Opposition Benches here this afternoon to represent the view of their party. Where are they? It is the gaps along their Benches that worry me. They obviously agree with the Chancellor, except when it comes to Divisions, when they will be dragooned into the Lobbies. There is not even a Whip on the Opposition Front Bench. However, out of the great generosity that I have for Whips on both sides of the House, I withdraw that remark.
Let us take note, before I leave to attend to urgent business outside the House, that I am on the side of the Chamber men—not chambermaids—when we come to debate procedure. I am on the side of the men and women who want to serve this Chamber above all, rather than of those who run upstairs to Select Committees, and other Committees, and who work in the private rooms of this great palace. I believe that this is where the work is done.
As we consider clause 5, where are the men and women of this Chamber? There are not enough of them on the Opposisition Benches. Admittedly, those who dare to get up speak strongly against the Budget. I suspect that there is a brief from Transport House that tells them to concentrate on the £10,000 a year mark. Time and time again during this debate I have heard it said that that is the Chancellor's Achilles heel. The Chancellor does not have an Achilles heel. He has boldly approached the problems of this country. He is the first Chancellor for 25 years who has made such a bold attack on the problems that we face. I should like to see some reality from the Labour Benches and some evidence of their being prepared to accept the challenge presented


by the Chancellor's brave attack on our problems.

Mr. Michael Meacher: The hon. Member for Canterbury (Mr. Crouch) made some amusing remarks—some of them intended. However, the essence of his radicalism would appear to be that he believes that this is a valuable Budget because of the incentives that will galvanise middle management. That is the group that he places in the £10,000 to £12,000-a-year band.
He misses the point, made repeatedly from the Labour Benches, that below a salary of £12,000 a year the gain—net of VAT, petrol duties and other increases in charges—will be nil. In fact, it will be negative. That is before we take account of the prospective increases in mortgage rates. Even on the hon. Gentleman's own argument about radicalism, this Budget is exceedingly unradical and reactionary. It is a Budget in favour of the super-wealthy.
The ostensible rationale of the tax cuts, from the Government's point of view, is that Britain is taxed unduly highly compared with our competitors, especially at the higher ranges. Therefore, they claim that it is necessary to bring Britain more closely into line with other countries in order to increase incentives to promote greater productivity and growth. That, as I understand it, is the Government's theory.
It can easily be shown that the essence of the Government's case is wrong, since Britain, contrary to what has been said from the Tory Benches, is not unduly highly taxed. I will produce the evidence for that in a moment. Even if they were right about that the Government's motives are misconceived, since the available evidence shows that high tax cuts are unlikely to increase incentive.
Contrary to the impression that has widely been given by Government spokesmen, we pay, believe it or not, a smaller proportion of our gross national product in taxes and social security contributions than any other EEC country, with the sole exception of Italy. That is not an interpretation from the Labour Benches. It has not come from Transport House. It comes from the Government's own journal, Economic Trends of December 1978. This shows that the

figure for the United Kingdom is 40 per cent. In France and Germany—I invite hon. Gentlemen on the Tory Benches to note this—it is 44 per cent.; in Belgium, 45 per cent.; in the Netherlands, 51 per cent.; and in Sweden, 58 per cent. All these countries have a considerably higher rate of economic growth than we have. Britain is the one country in the western world where the share of taxes and social security contributions has gone down during the 1970s.
It may surprise some hon. Members in the Tory Party that in Germany, France and many other countries they can check these figures in the Government's own journal—that share rose by between 4 per cent. and 5 per cent. in the 1970s. In Britain it has fallen by 3 per cent. I realise that I have been speaking about the total income tax take and that the Tories have repeatedly referred to marginal tax rates. They love to harp on the special figure of 83 per cent., which has now been brought down to 60 per cent. In fact, as opposed to theory, allowances against income tax—which have not been mentioned today—are now on a huge scale. They make the top marginal rates a great deal more theoretical than real.
The value of these non-personal tax reliefs—on mortgage interest, life assurance premiums, contributions to occupational pension schemes, certain interest income, alimony and maintenance payments, relevant annuity relief and age allowance—now account for no less than £4,000 million a year. Of course, they are heavily concentrated on the highest earners. It is precisely for that reason that the Government's statistics show that the poorest families—say, on £1.000 a year—pay about 10 per cent. of their gross income in income tax and national insurance, whereas the well-off family on £10,000 pays only 24 per cent. I suggest that that paints a completely different picture from the appearance of punitive-ness in the 83 per cent. rate of tax on the top slice of income, which is levied on those earning more than £24,000 a year.
5.30 p.m.
Comparison with the tax structures of other countries—both within the EEC and outside—suggests that tax rates here are higher. But that fails to take account of the non-personal allowances against


tax which now have a value of no less than one-fifth of the total value of all income tax now collected.
There may be a case, both on psychological and political grounds, for reducing the high marginal rates by phasing out these non-personal tax allowances and creating an income tax structure which is net of these allowances and which corresponds with what people actually pay. That was sensibly done in 1972 under a previous Conservative Government, when earned income allowance was phased out and the standard rate of income tax was reduced at a stroke from 38·75 per cent. to 30 per cent. However, on the basis of the tax systems of other EEC countries there is no case for lopping the high marginal rates while leaving intact the considerable non-personal allowances which overwhelmingly benefit the rich.
The Government are wrong in trying to give the impression that direct taxes in the United Kingdom are unduly high, and that comparison with other countries therefore suggests that a switch should be made towards greater indirect taxation. The EEC national accounts show that indirect taxes are already a higher proportion of total tax revenue here than in the other EEC countries excluding Denmark and Ireland. The figure in the United Kingdom is 45 per cent., in France it is 40 per cent. and in Germany it is 37 per cent. That seems to knock out another major reason for the Government's proposed change.
The proportion of indirect taxes in total tax revenue has been rising in the United Kingdom in recent years. The Treasury says that it was 48 per cent. in 1971 and that it is now 52 per cent. That applied before changes were made in the Budget. It has been higher in only two out of the last 20 years. It would be quite wrong to move even further out of line with the other EEC countries, when alignment with the EEC is supposed to be the justification for reducing the high marginal rates of direct tax.
The most important factor is the effect of all this on people's pockets. The latest Government survey shows that the poorest families with children pay about a quarter of their disposable income in direct taxes while the richest pay about one-eighth. It is difficult, therefore, on

grounds of equity to see any justification for switching the tax burden even more heavily against the poor.

Mr. Anthony Nelson: The hon. Member was comparing our tax rates with those in Europe. Is not the important point not the comparison of percentage rates of direct or even indirect tax but the ability of people to pay those rates? Should not one therefore look at the per capita real income of people in the various European countries and deduct from that the percentage rate of tax? That would show generally that people in Europe have, after tax, substantially more real money to dispose of than is left to the people in this country. The percentage differences do not demonstrate that. The people in this country are much less able to bear the prevailing percentage rates of tax than are the people in Europe because our per capita income level is much lower.

Mr. Meacher: That is a fair point, and I accept what the hon. Member is saying. Growth rates abroad are higher and real incomes at all levels of the working population are also generally higher. But if we are to cut income tax it should be cut evenly across the whole working population and not be excessively concentrated at the top. If all the income tax cuts were on the standard rate, we on the Labour Benches would not object.
These facts all show that there is no justification for this tax switch, and one is then forced to discover the real motive behind the switch, apart from what appears to Labour Members to be a pay-off to the Tory Party's richest and most powerful supporters. Of course, the Government will say that the motive is to promote incentive, but that is misconceived. It is not clear that if a person's real income is depressed his drive is necessarily sapped. It is at least as plausible to suggest that it would increase a man's determination to earn more, by working longer hours, by seeking to acquire bonuses, if need be by changing jobs, or by some other means.
This is not just conjecture. There is hard evidence that this is what happens. The Financial Times conducted a survey—there is little other evidence on the subject—of about 700 managers earning around £10,000 a year. The results are interesting and relevant to the Bill. The


survey found that only 17 per cent. of middle managers said that a depression of the level of their salary reduced their will to work. Rather more—25 per cent.—said that it increased their ambition to make up their net pay to the desired level. If Ministers are contemplating further steps along this road they should take note of that.
Even if the Bill provides an extra incentive, however, why should people at the top be given 100 times the incentive given to the real wealth creators, the people on the shop floor? The average-pay worker was given a tax cut equivalent to a pay rise of about 4 per cent. The top income earners, however, have been showered with a largesse which involves a gross pay rise equivalent to more than 80 per cent., which is 20 times as much.
People at the top got an even bigger differential. The average worker has had a pay rise equivalent to 4 per cent., but the Prime Minister will get an extra £43 a week. That assumes that she pays tax separately from her husband which, like all sensible tax lawyers, no doubt she does. It is not clear to me why she should get 11 times more than the average. Her increase, however, is certainly less than some others. Mr. Norman Castle, the chairman of S. and W. Berisford, the sugar importers, got a staggering rise of £1,155 a week out of the Budget. Why should he get 280 times more than the dockers on the quayside who are working for his company who do the unloading and the work of importing?
Why should Mr. Michael Pocock, the chairman of Shell, who got an extra £405 a week, need 100 times the average increase for his company? Why should Mr. Maurice Hodgson, chairman of ICI, get an extra £306 a week, about 75 times the average for his company?
The truth is that those men—they are nearly all men—already have very sizeable fringe benefits. They have already awarded themselves considerable gross pay rises in recent years in order to compensate, as has been said, for high tax rates. They already have manifold allowances against tax which are closely geared to high income. They already, above all, have strong psychological motivation in the form of considerable job satisfaction,

high status and substantial power and authority.
I submit that further huge benefits concentrated on that tiny clique at the very top are unjustified in terms of international comparison, they are not warranted in terms of the extra incentives which they will provide, and by their gross unfairness in an already deeply unequal society they will cause further alienation and deepen social divisions for the explosion which is certainly coming this winter, or later. That is why we should throw out this part of the clause, the payola for the rich that it is.

Mr. Ted Graham: I begin by acknowledging the wisdom of the hon. Member for Canterbury (Mr. Crouch) in saying that what we are discussing in this clause—I think that these were his words—is the kernel and guts of the whole Budget. If that be so, it is not possible to do other than use these provisions as a reference point for a great deal else in the Budget. We are talking of the Budget strategy, and in considering the clause we do right to refer to its wider effect and relationship to a great many other parts of the Budget.
I acknowledge also the devastating demolition job on the premises behind the clause just done by my hon. Friend the Member for Oldham, West (Mr. Meacher). Clause 5, and paragraphs (b) and (c) in particular, are offensive, since it is clear that the tax forgone by the Treasury is to be recouped from the lower paid, the already disadvantaged, the sick, our schoolchildren and workers in our public services. They are all to suffer so that those with earnings of more than £20,000 a year can keep more. This is a Robin Hood in reverse Budget, a policy of robbing the poor to give to those already rich so that they may become even richer.
Increased VAT was sold not only to the House of Commons but to the country as part of a package—a dash for freedom in a great incentive Budget. But what is the incentive for, and for whom is it intended?
To illustrate the force of the case, I shall quote from a letter which appeared in my local press only last week. It is written by a constituent of mine, Mr. Stanley Eric Dale, of 114 Chatsworth Drive, Enfield. He began his letter by


quoting from what the Chancellor of the Exchequer said on 18 June:
 No Budget has done more to help the low paid.
Let us see. My constituent quoted also from the words of the Secretary of State for Trade, that the Budget
 has increased people's real take-home pay, widened people's personal choice and encouraged earning rather than spending."— [Official Report, 18 June 1979; Vol. 968, c. 930.]
Again, let us see. My constituent quoted also from the words of the Prime Minister when she stressed that workers would be better of after Budget income tax cuts.
My constituent went on in his letter in these terms:
 My wife and I went shopping last Monday, the first day of the increases in VAT, and purchased the following items: 4 gallons of petrol—extra VAT 28p; one bottle of medicine—extra VAT 10p; two ounces of tobacco—extra VAT 11p; half a pound of barley sugars—extra VAT 1½p; rubber bands—extra VAT 11p; one reel of cotton—extra VAT 5p; parking the car—extra VAT 1p; laundry—extra VAT 11p; knicker elastic—extra VAT 2p; soap powder—extra VAT 8p. This amounted to 88½p extra VAT in one day.
5.45 p.m.
I am not saying that that happens every day, but it happened on the very first day of the new VAT rate—an extra 88½p. My constituent went on:
 My wife and I happen to be more fortunate than many others. We are two of the 1,300,000 people who have been relieved of paying income tax—45p a week.
He is relieved of paying 45p a week and in one day he paid 88½p extra.
 There must be many others who do not pay income tax at all, so therefore these people must be worse off than we are. Sir Geoffrey also stated that this was a Budget of incentives.
My constituent concluded by saying:
 The only incentive that I can think of at the moment is to cut my throat and get it all over with.
If that is the sort of mood of despair which the Budget induces in someone who is alleged to be better off as a result of it, what can it do to others?
I am concerned not just about the VAT increases needed to finance clause 5 and the tax reductions. Other imposts have been visited upon my constituents and the people of the country in the name of the incentives that we are supposed to welcome. For example, there are increased

bus fares, higher train fares, higher petrol prices and slashed public expenditure. I welcome and endorse the comments of my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), who dealt at length with the effect of the Budget, because—let there be no mistake—the money being saved and given out by the Treasury under this clause has to be recouped somewhere.
The Enfield Tory-controlled council has already begun to spell out to my constituents how it intends to help the Tory Government to carry out their central Budget strategy. There will be freezing of posts in education, for example. Already in all departments in Enfield we have staffing levels well below what should normally be expected. They will be frozen and eroded. Education will be cut to ribbons. Increased VAT has added to the costs of education, the social services and housing, affecting furnishings and teaching supplies.
A new school is desperately needed in my constituency to replace the out-moded Houndsfield school but the future of that project is now placed in jeopardy because, when the Enfield council carries out the dictates from Whitehall in trying to carry through the Budget strategy, the question whether that new school goes ahead will undoubtedly be high on the agenda. But the school is needed to give the community an added lease of life.
Untold damage will be done by this Government to the present and future generations by their senseless policy of paying for the tax handouts under this clause with increased VAT and public expenditure cuts.
I happen to be a graduate of the Open university, and I am a member of the council of the Open university. I read the university newspaper, Sesame, for July with particular interest. I was disturbed to note the following on the front page:
 The Open University faces a bleak financial prospect. In the June Budget, cuts in education spending include £250,000 from this year's Open University grant of £33 million, and a further £270,000 in the first three months of next year. The effect of increased VAT and of staff pay rises which may not now he covered by supplementary grants means that the total reduction is much greater.
I put this question directly to the Treasury. Do the Government have any real appreciation—

The Temporary Chairman (Sir Stephen McAdden): Order. I apologise for interrupting the hon. Gentleman, but he will realise, I am sure, that he is getting away from the amendments that we should be discussing. I shall be glad if he will relate his remarks more closely to the amendments rather than present arguments about taxation in general.

Mr. Graham: I acknowledge what you say, Sir Stephen, but the point I am trying to make is that if the clause remains as it stands it will remain as part of the Budget strategy, and the Budget strategy implies a great deal more than merely reducing the rates of income tax.
Is the so-called incentive of a few extra pounds in some pockets, which is what is involved in the clause, worth the " aggro ", the distress, the agony and the despair inflicted on large numbers of people, many of whom are defenceless? How does the young mother with children at school, such as those in my constituency of Edmonton, balance her tax bounty with the effect of soaring prices and slashed public services? That applies to the family that relies on help from the social services and to those who depend on home help. Clearly there will be fewer home helps in Edmonton if the clause continues to remain part of the Bill. Boroughs are being asked to reduce their public expenditure to finance the clause.
Do the Government and their supporters understand what they are doing to the ordinary, average, typical taxpayer by making such a drastic, traumatic switch from direct to indirect taxation? The clause is at the heart of the Budget strategy of switching from direct to indirect taxation. It sounded simple, brave and right during the election campaign to leave more in a person's pocket to spend as he wishes. The past few weeks have brought the reality of that enticing prospect home to millions of people. The most dismayed are those who voted Tory for the first time on 3rd May.
I am prepared to accept that electors were fed up under a Labour Government. I can understand why they were fed up and desperate under the Labour Government. However, they did not bargain for an economic package, part of which is the clause, designed deliberately as an act of government to escalate inflation to

nearly 20 per cent., a doubling of the rate in about six months. Did they bargain for a bank rate at a record high? When they voted Conservative did they bargain for a mortgage famine and a near-certain colossal mortgage rate of 13 per cent.?
The tax reductions that are part of the Budget cater only for the very rich. They result in the average family, as the Prime Minister calls it, being £1·25 better off a week, and I challenge even that derisory figure. So that the average family may be £1·25 a week better off, the Government have introduced clause 5. That applies especially to paragraphs (b) and (c).

Mr. Crouch: Is the hon. Gentleman saying that he believes, as a Labour Member—and advises his party accordingly—that the policy to follow from now on is one opposed to a reduction of income tax? I am sure that his constituents and electors generally will be interested to hear that he is totally against a reduction of income tax.

Mr. Graham: I have never said that. My hon. Friends and I are against the way in which the Government have resorted to the shabby tactic of taxing the poor and the sick to finance the gross reductions of income tax that are part of the clause.
In their last two years of office the Labour Government reduced income tax, as part of a balanced package. The package before us is not balanced.

Mr. Nicholas Winterton: The Labour Government were forced to reduce income tax.

Mr. Graham: However we did it, we did it.

Mr. Winterton: The House of Commons did it.

Mr. Graham: The Labour Government reduced income tax to take account of the need to restore incentive.

Mr. Winterton: No.

Mr. Graham: I regard it as obscene that the Government have literally gone overboard and inflicted great trouble on so many.

Mr. Rooker: If my hon. Friend cares to think back to that which took place


and to which the hon. Member for Macclesfield (Mr. Winterton) has referred from a sedentary position—namely, the then Opposition parties combining to vote against the Finance Bill 1978 and to reduce taxation—he will recognise that that action had exactly the same effect as the clause will have if it is enacted. Only those earning twice average earnings benefited from the Tory tax amendments to the 1978 Bill. That is the position that we find in the Bill.

Mr. Graham: My hon. Friend makes a good point. Conservative Members fail to understand that it is the gross inequality and inequity of the clause that causes so much offence among Labour Members.

Mr. Winterton: Is the hon. Gentleman aware that the Budget about which he is being so derogatory removes 1·3 million from paying tax? Does he realise that in addition to reducing the level of direct taxation the Government are raising the threshold at which people start to pay tax? If we raise the threshold, that will benefit all those paying tax, whether they are paying at a high rate or a low rate. In other words, everyone benefits.

The Temporary Chairman: Order. I am sure that that is an interesting intervention, but it is likely to divert the hon. Member for Edmonton (Mr. Graham) from his address, which should be devoted to the amendments. I hope that he will not follow the path introduced by the hon. Member for Macclesfield (Mr. Winterton).

Mr. Graham: I am obliged, Sir Stephen. I have quoted the remarks of a real person in the real world, who is one of those alleged to benefit from the Budget, having been removed from the taxpaying sector. That gentleman wrote to tell me that in one day he paid an extra 88½p in VAT. That must be set against the 45p a week that he was paying in income tax.
Do those on the Treasury Front Bench apprehend the grave injustice of imposing the heaviest burdens on the weakest backs in our society? In the name of choice they are taking from the poor to make the rich richer. Government spokesmen seek to justify the huge tax concessions that are concealed within the clause by telling my constituents that they are

now free to decide how to spend the alleged benefit of £1·25 a week.
The reduction of income tax must be set against the public expenditure cuts that have accompanied Tory freedom of choice. Am I to tell my constituents that with their extra £1·25 a week they now have the choice to buy a little more education, a little more social service provision, a little more housing and a little more health care to make up for the crippled public services imposed on them by the Enfield Tory council, prompted by a firm prodding from Whitehall? I hope that someone will explain to me and my constituents the purpose of this pointless exercise. It is clear that it will create two nations once more in Britain.
Clause 5 is the cynical pay-off clause giving those with above-average incomes a hefty slice of additional income at the expense of below-average wage earners. For some it is good news but for most of my constituents, especially those who voted Tory, it is bad news. All my constituents, regardless of whether they voted Tory and whether they can look after themselves, will contribute through the clause, contingent increases in VAT and cuts in public expenditure, to make life easier for the well-off. It is a recipe for national divisiveness and should be rejected. I ask the Committee to support the amendment.

The Temporary Chairman: I request hon. Members to apply their minds to the amendments rather than divert to other subjects that are much more interesting, I am sure, but not within the scope of this debate.

Mr. Winnick: My hon. Friend the Member for Edmonton (Mr. Graham) rightly said that clause 5 and the amendment are to a large extent the crux of the Budget.
Undoubtedly a great deal was said during the election campaign by the Conservative Party about reducing taxation. It would be foolish to pretend otherwise. It is true that the Conservative Party put great emphasis, as the hon. Member for Canterbury (Mr. Crouch) said, on reducing the standard rate of income tax. It is right and proper to concede that many electors did not accept the point of view of the Labour Party. I should say that they were taken in by Conservative propaganda about reducing the standard rate.
Labour candidates argued at the hustings that the average person would not benefit from a reduction in direct taxation, as indirect taxation would increase. To a large extent our arguments were not accepted by a large section of the voting population, hence the result on 3 May.
However, most of the British people now realise that a reduction in the direct rates of income tax does not benefit them. As my hon. Friend rightly said, the increased rate of value added tax and increases in other forms of indirect taxation are far in excess of any benefit that the average taxpayer is likely to gain from a reduction in income tax. That is one of the reasons why the Budget has proved in a short period to be so unpopular. I do not think Conservative Members will quarrel with the statement that throughout the country there has been a rejection of the Budget. That has happened because it is considered to be unfair and unjust.
The richer section of the community will benefit decisively from the income tax reductions. Illustrations have already been given. The chairman of S. and W. Berisford will gain £1,155 a week as a result of the Budget. That is a large sum of money. The chairman of ICI will gain £306 a week. The chairman of Shell will gain £405 a week. My constituents do not earn those sums. Far from it. They do not even earn what those gentlemen will gain from the Budget. We are justified in describing this as a rich man's Budget. It undoubtedly helps the richest and most prosperous in the community.
6 p.m.
Take, for example, the difficulties that will be faced by those buying houses on mortgage if the mortgage interest rate goes up on Friday. A large number who voted Tory on 3 May will realise with much bitterness that they have experienced a con trick. Those who fear what may happen on Friday do not earn the large sums that I quoted. In the main, they earn ordinary incomes. A number of my constituents are owner-occupiers. They fear, with justification, what the increase in the mortgage interest rate will mean for them and their families come Friday.
Apart from the reduction in the standard rate of income tax, higher charges and higher VAT, there will be cuts in

public expenditure. In the past two weeks the local council in my community—Walsall—undertook an urgent review of the cuts in education, social services and housing. As a result of the reductions in public expenditure it is likely that there will be a substantial increase in unemployment in the next four to six months. The cuts being made in education, social services and housing will affect working-class families. Those on low incomes will feel the cuts most of all.

The Temporary Chairman: Order. I am sorry to interrupt the hon. Gentleman. I congratulate him on his return to the House. He is not following the line that I asked hon. Members to take—which was to deal specifically with the cuts. Tedious repetition may consist not only of one hon. Member repeating the same thing but of several hon. Members repeating it.

Mr. Winnick: I was trying to say that a large number of ordinary people would feel the effects of the expenditure cuts provided for in the clause. That was my point. I want to keep within the terms of order.
I give this warning. If the Opposition amendment is not passed, ordinary wage earners will try, in view of price increases, to compensate for what they lose by means of further wage increases. It is no good Government supporters calling for trade unions and others to show restraint when they are faced with the most provocative Budget of all time. It is understandable for trade union conferences now meeting, and the TUC later in the year, to come to the view that it is right and proper to pursue wage and salary claims in view of the way in which ordinary people are penalised by the Budget. It is perfectly in order for those affected to pursue such claims.
Inflation must go up as a result of this provocative Budget. Some people think, with some justification, that inflation may reach 20 per cent. within a short period. That is a serious matter. Time will tell. I believe that the Government will pay heavily for this Budget. They will learn—as the Tory Government of 1970–74 learnt—their lesson within a short period. The Budget is being implemented against the interests of the majority of ordinary people. It is a Budget for the rich. In six or 12 months' time it is likely that


the Government will regret having introduced this provocative Budget. No one expected the Conservatives to do other than introduce a Budget to help the rich. However, the extent to which the Budget does that has caused surprise even among the Opposition.
When the Labour Party is returned to office, I hope that it will defend the interests of those whom it represents and that I will be as bold and resolute on behalf of them as the Conservative Party has been in the Budget that it has introduced on behalf of its rich friends.

Mr. Anderson: The hon. Member for Canterbury (Mr. Crouch) asked why the Opposition should criticise a Budget that was consistent with the prospectus put forward by the Tories at the last election. He argued that a prospectus having been put to the British electors and accepted by them, they must now accept the consequences, benefits, advantages and disadvantages of a radical Budget. I trust that he is now in less of a lather. If what he said is accepted, and we are in the realm of political honesty, I hope that he will look at the promises and pledges made by his party—especially the pledges that the Tories would not double VAT, that they had no intention of increasing prescription charges, and the denial that they were considering selling BP shares.
If we are discussing political honesty, I hope that the hon. Gentleman will bear those factors in mind when he considers the disillusionment of the populace with politicians. Election promises were made—the reduction of direct taxation and the switch from direct to indirect taxes. Those formed a major part of the Tory prospectus. I hope that he will also consider the other Tory promises made at that time. As he is an honourable man, I know that he will feel suitably ashamed at the dishonest way in which the Conservative Party acted in the election campaign on those issues. If the hon. Gentleman wishes to gainsay that those pledges were made in the election campaign, I am ready to give way.

Mr. Crouch: I feel like Brutus. The hon. Gentleman sounds like Mark Antony. Yes, I am an honourable man. I said in the election campaign that we would reduce direct taxation. I was challenged at every meeting by people

whom I had thought to be Conservative Party supporters, and by supporters of other parties. They attacked me and asked how we would pay for the cuts. I believe that I was honest in saying that we would do so by increasing indirect taxation, by cutting Government expenditure, and by allowing people to spend more of what they earned rather than requiring the Government to decide that. The electors chose that change of direction.

Mr. Anderson: That is an entirely honest response, very much in keeping with the hon. Gentleman's usual position. I hope that he did not go beyond that and echo the promise of the Leader of his party, who said " We shall not double VAT, and have no intention of introducing prescription charges." If he did not follow the right hon. Lady in that regard, he indeed spoke honestly to his electorate, and not in the way in which his party spoke to the country as a whole.
This, clearly, is a Budget the major benefits of which will go to the more prosperous. If the Budget achieves the objects that the Government say they set out to achieve, there may be some justification for that. It is, nevertheless, a good return on capital for those who have invested in various ways in the Conservative Party. It is a Budget for the Lulus and for the Petula Clarks, and for those who sang so happily on the stages for the Conservative Party. It is clearly not a Budget for the less prosperous people, the less advantaged individuals and the less advantaged regions in the country.
One thinks also of what is now proposed for the British National Oil Corporation, development land tax, and so on. Perhaps the one major Tory contributor which has had two black eyes as a result of the Budget is the Campaign Against Building Industry Nationalisation. It is clear that the construction industry will have a major shock as a result of the Budget. Although individual managers within the construction industry may well benefit from the direct tax reductions, we know that house building will be adversely affected, not only in the private sector, as a result of the increase in mortgage charges, following directly on the increase in minimum lending rate, but also as a result of the VAT effect on maintenance and that side of the construction industry's work. It will


adversely affect employment in the construction industry, and those people in CABIN who fought so hard on behalf of the Conservative Party may well now be rueing that they did so.
The backcloth, essentially, to the Chancellor of the Exchequer's speech was that we, as a country, are going through a period of decline, that our productivity is low, that we are approaching almost the point of de-industrialisation, and that somehow we must adopt radical policies in order to break out of this period of decline. How do we go about it? We know that this has been the problem faced by Governments of each major party in the last two decades.
Various philosophers' stones have been sought, such as export-led expansion, and expansion at all costs under the Barber Budgets in the early 1970s. These attempts to break out of that period of decline have failed. The Government are now saying that they have found another philosopher's stone—a way that has not yet been tried—and that is by the use of incentives. The centrepiece of these incentives is the reduction in direct taxation. This is to be justified even if, in the short term, there are adverse consequences, and even if the Government concede that in the short term the reductions in direct taxation, taken together with the other elements in the Budget, fuel inflation. It is to be justified even if, in the short term, these reductions in direct taxation lead, as the Government may well concede, to an increase in unemployment.
The Government take the view that these adverse and possibly short-term consequences must be justified, because they believe that this is the route—by incentives and by reduction in direct taxation—that will allow the country to break out of the restrictions that have affected it over decades.
6.15 p.m.
The Government, in putting forward these reductions in direct taxation, regard them as so important that they are bringing them forward even though the circumstances that faced them after the election may well be different from and graver than those that they had considered before. This may be because of the rather spurious argument about wanting

to look at the books, or, with more justification, because of the OPEC price increases and their effect on our domestic economy. In spite of those changes, the Government have said, in a wooden way, that they will not adjust their proposals, because they are convinced that the reductions in direct taxation are so well justified.
The key assumption, then, is that these reductions are relevant and that they will work. We have to ask for whom the incentives will work, and what empirical evidence there is that a reduction in direct taxation will lead to the kinds of incentive claimed by the Government. My hon. Friend the Member for Oldham, West (Mr. Meacher) has already dealt with the international comparisons, and with whatever data the Government could bring forward to show that we are overtaxed in comparison with our major competitors, and pay, as is alleged, a greater proportion of our total tax burden by way of direct rather than indirect taxation. The figures put forward by my hon. Friend, which are quite incontrovertible, surely indicate that the premises on which the Government base their proposals are, at the very least open to serious doubt.
I ask again: who is meant to work harder and to produce more as a result of these reductions in tax? It cannot, for example, be the professional workers—the lawyers, the architects and others. They are unlikely to increase their output as a result of higher take-home pay. Can it be the managers? My hon. Friend the Member for Oldham, West has already mentioned one aspect of the cushioning effect on managers of the high marginal tax rates, and that is the effect of the tax allowances.
There are also the so-called perks, mentioned by my right hon. Friend the Member for Llanelli (Mr. Davies). It is surely common knowledge that in the greater part of British industry, and starting at a relatively low income level, a person would expect to have a company car and would expect to have his petrol paid for by the company.
The Minister of State, the hon. and learned Member for Dover and Deal (Mr. Rees), is aware of the tax dodge concerning petrol for company executives. The company executive win


probably expect to be able to purchase various goods more cheaply at the company shop than elsewhere. He will probably expect to have free or subsidised private education for his children. He will probably expect to have his mortgage rate reduced as a result of company help. He will expect, perhaps, to have an interest-free loan from his company. All these things help to cushion the effect of the previously high marginal tax rates, and they also surely run counter to the idea of the executive being galvanised, in that these things keep him within the womb of the company. The various incentives tie him to his company and act as a complete disincentive to mobility and to improving his personal position by moving ahead in the way claimed by the Government to be so vital.
If, at the same time as reducing the high rates of direct taxation, the Government were to make a serious attack on the perks system, or to reduce the effect of the tax allowances—and the top-hat pensions, and so on—there might be some justification for their action, in terms of the bucket-in-the-well system, by which one moves up and is compensated as the other moves down. But there is no such suggestion.
There have been various whispers—Vatican-like smoke signals—that the Government, through the Think Tank or otherwise, are considering a reduction in these perks. I shall believe this when I see it. I can see no real attack on the perks system coming from the Conservative Party when in government. It seems to me unlikely that the Government will remove the perks system—the real disincentive—or make a serious attack upon it. One knows that the company car and petrol are contrary to what the Government claim to be pursuing in terms of the 10p on petrol, which is to encourage more economic consumption of a scarce resource.
If professional people are unlikely to be motivated, what about skilled workers? There must be relatively few skilled workers who come within the range of £11,000-£12,000 a year and who would benefit from the Budget. The real failure of the Government in their Budget is the failure to understand the psychology of the skilled worker. The Government are saying to those workers " Your bills are increased but you will have 3p off

the standard rate of income tax and various other tax improvements which will help you." The empirical evidence is that that is what my right hon. Friend the Member for Leeds, East (Mr. Healey) put forward in his Budget when he was Chancellor of the Exchequer last summer. It did not work then, so what likelihood is there that it will now? This is surely more an act of faith than actual experience of the response of the work force.
The worker who lives in a council house knows that his rent is likely to increase as a result of Government policy. Also, that same skilled worker and those who negotiate on his behalf as we enter the new wage round will know on black Friday—Friday the thirteenth—that mortgage interest will increase substantially, more than offsetting any gains received. In what way is the skilled worker likely to produce more or work harder as a result of the appeal of this Budget?
One might argue with some plausibility that, by contrast, the skilled worker will feel embittered because of what he will have to pay in PAYE—he is imprisoned within the PAYE system—when he sees the extent to which those above him have their differentials increased, because greater benefit will go to those on higher incomes. He will see the continuance of the perks system and will say "When I hear the appeals to my patriotism and loyalty and the request to pull hard together, what about the higher-paid? Why should I respond to this appeal when the Government have increased the unfairness and differentials between me and the higher-paid managers in my own company? " That, surely, is more likely to be the response from skilled workers than that which the Government claim. There is likely to be greater conflict, exacerbated by increased unemployment and inflation, which, on the Government's figures, will increase.
The Chancellor has antecedents in South Wales and in Surrey. In the past, whenever there is a real conflict of interest between those in South Wales and other less advantaged areas and those in the prosperous area of Surrey, the Chancellor has always chosen the people in the more prosperous areas. Here again, when it comes to a conflict such as that evident in the Budget, it is the Surrey man—the prosperous man—who wins


and those in South Wales and other disadvantaged areas who stand to gain least.

Mr. Rooker: I have heard all the speeches in this short debate, and the Committee will be pleased to know that I do not intend to repeat any of the valuable points made by my hon. Friends.
One of the advantages of having the Finance Bill in Committee on the Floor of the House—it is the first time that it has happened during the five years that I have been in the House—is that it gives 635 paid-up Members an opportunity to debate the minutiae of the tax system, which is a reverse social security system for the rich. The epitome of that is contained in the clause that we are debating—in other words, the tax thresholds that have been raised for the well-off in society.
The word " galvanised " has been bandied about. I think that it was first used by the Chancellor of the Exchequer. Nobody has said what it means. I am an engineer and a plain fellow, and to me the word means " zinc plated " or " protected from corrosion ". The Budget and this clause in the Finance Bill will be corrosive to society and industrial relations. When I hear that word bandied about I wonder whether anyone knows what it means. I have come to the sad conclusion that those who use it do not know.
The Chancellor has told us—I have no doubt that the Minister will repeat it—that the tax changes will motivate entrepreneurs and managers. I took the opportunity to go to the Library to look at jobs presently advertised for managers working at what I consider to be the sharp end of industry; for example, those who run the factory and get the goods out of the factory, such as engineering and production managers. I declare an interest, of course, because that was my experience before I came to this place.
I discovered that among the jobs currently advertised for June 1979 are works production manager, £7,000 to £8,000; production manager, £7,250, with career prospects; industrial engineer/production engineer, £6,000; senior body design engineer, £7,000; plant engineer manager, £7,500; chief production engineer, £10,000 plus car, and managing director

of a manufacturing company in Hull, £10,000 plus bonus, plus car.
It is not true that a brief was put out from Transport House about this—during the relevant time when one would have been prepared, if Transport House were so minded, the employees were on strike—because hon. Members on the Labour Benches can actually work out the effects of this Budget on families and on different scales of income. We know, because we can see for ourselves, that the break-even point is between £10,000 and £12,000. It is irrefutable that a family man earning £10,000 per year will be no better off, in total, as a result of the financial package contained in the Budget.
Certainly, the family man will be better off as regards the effects of clause 5, but there is the other side of the coin, which we have already debated and which we do not need to labour. The point that I make it that those at the share end of industry, doing the type of job that I have just read out, will not reach the break-even point. They will be worse off as a result of the Budget, notwithstanding the effects of clause 5.
Perhaps the Minister will tell us where the advantage is for those at the sharp end of manufacturing industry—those opening up a factory and making sure that it is running throughout the day. Where is the incentive for the producers and the supervisors of the producers? Where in clause 5 is the incentive for them? It is a simple qustion. It is quite clear that we shall have a debate on clause stand part, but this is a point that must be covered. Clause 5 also covers the basic rate of income tax, and those who do the jobs that I have just read out are not even covered by the change in the thresholds. Even under the Labour Government, except for the last example I quoted, they would not have paid the higher rate of tax anyway. So to move the threshold, which was already above their income, further up the income scale is of no benefit to them whatever.
The only gain for middle management comes from the change in the personal allowances, which we shall debate later in the evening, and the 3p reduction in the standard rate of income tax, but that change applies to millions of working people—20 million to be precise. The effect on the people at the sharp end of


industry—the motivators of everyone else—will be non-existent. In fact, it will be negative. This point must be met, because it was one of the points that the Minister of State made ad nauseam when in Opposition, about what the Conservative Party would do to get manufacturing industry on the move.
6.30 p.m.
I shall not labour my second point because it has already been referred to. It concerns the total myth about Britain being a highly taxed nation. That is true at the margin, but the fact remains that if the 83 per cent. rate is cut to 60 per cent. and coupled with the other reductions, at a cost of £600 million in a full year—which is a relatively small sum of money—not many people paid 83p in the pound to start with. That is a well-known fact.
The average rates of tax in this country were nothing like the rates at the margin. For example, someone on five times average income in 1977, which was not a small sum of money, paid only 50 per cent. of his income in tax. In the Netherlands, Denmark and Sweden, he would have paid more. This information is based on the Which? report of last June, which takes into account all special allowances, mortgage interest, child benefit, and so on. At every level of income, be it 80 per cent. of average income, average income, twice average income, or five times average income, the United Kingdom taxpayer appeared around the middle of the table of the advanced industrial countries. Therefore, the argument always related to the margin.
The Government claim that they are doing something about it because they saw major problems. The first reason for reducing the 83 per cent. rate was that it would not cost much, since not many people were paying it. At the same time, because of the high rates at the margin, a massive tax avoidance industry has built up and is still operating.
That is the third point that I want to make, and I should like to put a couple of questions to the Minister of State. I am a pretty realistic fellow, and I do not believe that there is much hope of carrying the amendment. It can be carried only if Conservative Members either do not vote, or vote with us. However, there are not many really " honourable " Members

opposite. I do not accuse anyone of being dishonourable. I mean " honourable " in the sense of putting their vote where their mouth is.
Conservative Members know that every word that I have uttered so far is true and irrefutable. They know that the effect on that section of society which is supposed to get manufacturing industry going will be negative as a result of the Budget, yet not one will be prepared to vote to stop it happening, not least the hon. Member for Norfolk, North (Mr. Howell), who made a somewhat rambling speech. In so doing, he widened the scope of the debate, because he talked about the Rooker-Wise amendment. He said that I had wrongly got a lot of credit. The reason why I and my former colleague, who will soon be back with us, got a lot of credit was that it was a very good amendment and people outside realised it.
As I said, this amendment can be carried only if Conservative Members vote in the interests of their constituents and not in the interests of the dogma emanating from the Government Dispatch Box. There are some new Conservative Members, and it may be that they will give the Tory Party some trouble. At some future date, on a particular amendment which is close to their hearts, it may be that we will find them with us.

Mr. Cook: Unlikely.

Mr. Rooker: Having reduced the highest marginal rate of tax to 60 per cent., will the Treasury collect the money? It is axiomatic that it wants to collect the money, and I am sure that the Treasury will have done its calculations about getting the money in.
On 3 December 1977, the Minister of State and I took part in a television programme on the subject of tax avoidance. The hon. and learned Gentleman will well remember it. We appeared on " The London Programme ". It was quite enjoyable. The hon. and learned Gentleman attacked—rightly so—the tax avoidance business that had been built up in this country. He made the point that it had been built up only because of the high marginal rates of tax. That was the ethos of his comments. He said:
 Well, let me make it clear for a start that no one in public life can responsibly be enthusiastic about quite such stark schemes as you've been outlining.


These were the schemes of Messrs. Bradman and Tucker. They were blown sky-high in The Sunday Times in May 1977, which showed that because of the way in which they worked this high marginal rate tax system by the reverse annuity scheme, they actually made sure that Wimpey got out of paying any tax at all that year. To his credit, the hon. and learned Gentleman said that he would not support these schemes. He made moral pronouncements, but he also made the point that
 The time may have come possibly to introduce some general anti-avoidance provision such as they have in Australia, to do away with the mass of detail stuff which is only confusing the issue.
By implication the hon. and learned Gentleman then made a strong attack on the operations of Bradman and Tucker. He said that all that was required was to bring the tax rates down and then these people would be put out of business. I suspect that they will not, even now that there is a Tory Government. The remarkable thing was that Bradman and Tucker were able to operate these schemes only because they found a merchant bank that was willing to operate these schemes in a conniving sort of way. I should add that in 1978 the last Labour Government passed retrospective legislation to outlaw these schemes, which cost this country hundreds of millions of pounds, simply because money was floated around the system like the Birmingham one-way traffic system. It went in at one end taxable and, lo and behold, emerged at the other end with no tax to be paid on it.
If the Tory Party gets its way in respect of this clause, I should like to know whether the Treasury will make sure that there are no further loopholes. The only way in which these loopholes could be operated was because Bradman and Tucker found a bank to finance these shady deals.
I should like to quote again from " The London Programme ". Godfrey Hodgson, the interviewer, actually said:
 In the advance interest schemes we just saw, the bank Tucker used was First London Security, the part of the Rossminster group of companies. The Managing Director of Rossminster was Roland Plummer, who's known Tucker since they were both young accountants in the city.

Roy Tucker then said:
 Rossminster was a young bank, who appeared to be doing quite well, when all the other banks, all the other small banks were falling. This is about 1973.
Then comes the crucial part:
 And Rossminster had a particular management capability and willingness to provide finance and other services in connection with these tax avoidance schemes.
They are still in operation. I do not want to be accused of being unfair to another hon. Member, but I should like to mention in passing the name of an hon. Member who may not yet have made his maiden speech. I make no attack upon him, and I shall be happy to argue and debate with him in the future. If the Minister of State has any doubt about how Rossminster was then operating, or has any doubt about how difficult it was for the Labour Government to close the loophole, he may perhaps like to have a word with his new Friend, the hon. Member for Abingdon (Mr. Benyon), who was the co-founder of the Rossminster bank and group of companies.
According to the Leader of the House last Thursday, the hon. Member for Abingdon is a man of talent, because the right hon. Gentleman said that if hon. Members had other jobs they had talent. It is, therefore, quite clear that the hon. Member for Abingdon has talent. The hon. Gentleman came to this House in extremely tragic circumstances, and as I have said, I do not quarrel with the way in which he has operated his business interests. I have repeatedly reminded the Minister of State that at an early opportunity I would raise the matter discussed in the interview in which he and I took part, if his party came to power. Unfortunately, that happened, and my only advantage is that in opposition I am once again able to take part in the Committee stage of a Finance Bill.
Having reduced the high marginal rates of tax, will the Minister guarantee that all the schemes that operated when those rates were higher will be stamped out? We can then collect all the money due to the Revenue, notwithstanding that there has been an almighty rip-off of the 20 million people paying PAYE.

The Minister of State, Treasury (Mr. Peter Rees): We have had an interesting and far-ranging debate. Hon. Gentlemen opposite have tended to treat it as a


Second Reading debate, and those of us who over the years have been on the Standing Committee on the Finance Bill and have become connoisseurs of radical ham have noticed some specialised contributions.
The hon. Member for Oldham, West (Mr. Meacher) spoke about a pay-off to the richest supporters of the Conservative Party. He always makes a highly original contribution and I admire his fascinating grasp of statistics, even if they tend to mislead rather than clarify the debate. I am sorry that he is not here. The hon. Member for Edmonton (Mr. Graham) moved rapidly from the Front Bench to the Back Benches to make an apocalyptic speech on the impact on his constituents of the Budget. I am glad to see him back in his normal place. The hon. Member for Walsall, North (Mr. Winnick) said that it was the most provocative Budget of all time. That is a challenge for subsequent Chancellors. The hon. Member for Swansea, East (Mr. Anderson) is normally moderate in his contributions. He was unmindful of those for whom he appears on the South-Eastern circuit, going back to his Welsh origins in Swansea, East. However, there was a dilemma facing my right hon. and learned Friend the Chancellor of the Exchequer, just as there is a dilemma facing the hon. Gentleman, and I admired the elegant way in which he attempted to resolve it.
Finally, we are glad that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) has not been debarred from taking part in this debate. It may be his last appearance on the Committee stage of a Finance Bill, but I hope not. Over the years we have come to treasure his interventions, but the best that he could do was to describe the Budget as corrosive. That is rather below his form, and perhaps his new-found responsibilities have slightly tempered his ardour. He trotted out certain specialised points on every possible and even improbable occation, and I shall endeavour to deal with them.
As hon. Gentlemen have ranged widely, I hope that I shall be permitted to set clause 5 in its true perspective. It does not deal only with the higher rate tax but with the reduction in the standard rate. Listening to Labour Members, it is difficult to recall that the previous Chancellor

managed gingerly to inch that rate down by 1 per cent. on one occasion. He had to be encouraged on another.

Mr. Denzil Davies: We are debating one amendment that relates to paragraph (b) and not to the clause in general.

6.45

Mr. Rees: I wish that the right hon. Gentleman had reminded his hon. Friends of that. The debate has been far-reaching, and to get my remarks in context, I wish to remind the Committee that there are several facets to clause 5. One is the cut in the basic rate.
I do not wish to dazzle the House with statistics. I am not really as numerate as the hon. Member for Oldham, West. The cuts in the personal allowances were by far the most expensive—if I may put it in that way. In a full year they involve a diminution in the tax take of slightly over £2 billion. In a full year the cut in the basic rate of 3p will cost £1,395 million. The cut in the top rate, including the raising of the threshold and the altering of the bands, will cost, in a full year, £662 million. The full weight of the cuts is concentrated on the personal allowances, then there are the cuts in the basic rate. The smallest cuts are those in the highest rates. It may be asking too much for Labour Members to take that in, but I wish to make that point before coming to the amendments.

Mr. Rooker: Will the hon. and learned Gentleman accept that the previous Government were responsible for half the cut in the allowances, because of indexation? Only half of the new cut—half of the £1·8 billion came from this Government. They have spent £900 million on the allowances of 20 million people and £660 million on the few hundred thousand who are well off.

Mr. Rees: On reflection, the hon. Gentleman will realise that that is a rather specious point, because it was an agreed Finance Bill. Purely on the basis of the Rooker-Wise amendment, carried with the support of the Conservative Party, the previous Chancellor would have been obliged to lay an order. The right hon. Gentleman knew that in his previous incarnation he would not have to find the money. I remind the hon. Gentleman, on a technical point, that the reliefs are not operative until 1 August.


My right hon. and learned Friend had to put together the substantive Finance Bill for this year—our Administration had to determine the balance of the Finance Bill. This year the personal allowances have been increased beyond anything that was contemplated by the Labour Administration. In a full year—and I emphasise a full year—that will be £2 billion. The hon. Gentleman has considerable pride in the authorship of the Rooker-Wise amendment. If, however, he does not appreciate where the balance of the Finance Bill lies, I am sure that other hon. Members will do so.
Amendments Nos. 42 and 45 were spoken to by the right hon. Member for Llanelli (Mr. Davies). They relate to perks, which is an obsessive subject with Labour Members. Over the past five years—I shall not say going back to 1948 because no one but the right hon. Member for Down, South (Mr. Powell) will recall that—in the Finance Bill Committees the subject has been raised time and time again by Labour Members. The regime of perquisites has become unattractive and possibly a little out of hand, but it is a consequence of high tax rates. No hon. Gentleman has yet observed that the value of perks will be considerably diminished by the proposed cuts in the higher rates. If hon. Gentlemen are serious about pressing amendment No. 43 to a Division and if, contrary to the expectation of the hon. Member for Perry Barr, the amendment were carried, the consequence would be to increase the true value of tax-free perks.
In an ideal regime—certainly one to which the present Administration hopes to move—perks would be done away with. I hope very much that employers and those responsible will revert to the old tradition of paying people in cash and not in kind. That is the right principle, but when one starts to apply oneself to the problems in practice, one finds how difficult that is.
The right hon. Member for Llanelli, who is usually so candid and open-minded on these questions, ought to have reminded the Committee that the Administration of which he was a distinguished ornament had three separate goes at attempting to cure this problem. He threw out all sorts of loopholes that

he suggested still existed after his efforts. He talked about free petrol. I do not know whether that is a perquisite. It could be that under the existing law it could be taxable. Again, that is something that we must look at.
Then the question of cars arose. I think that the right hon. Gentleman would have been better advised to remind the Committee that his right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), when he was Financial Secretary to the Treasury, came forward with some brand new measures that would solve this problem once and for all. Unfortunately, he had not done sufficient homework. It was pointed out that the measures that he proposed would do irreparable damage to the car industry—which I am sure would worry the hon. Member for Perry Barr—and he had to withdraw them, and he brought them back the next year. If the right hon. Member for Llanelli is saying that they are still defective, I must say that Opposition Members have had a certain amount of time to look at the problem.
I was asked whether we would do something about perks. Any responsible Government—certainly the present Administration—would want to look at the whole field of perquisites and see what could be done. I hope, too, that the climate for tackling this problem will have been considerably improved when this Finance Bill and the rates proposed in it are passed into law. I hope that it will be recognised in industry—and not only in industry: there are other areas—that it is much better on the whole that people should be paid in cash. There will always be exceptions. It is perhaps wrong for me to identify them tonight. They can be identified on another occasion. I hope that that will reassure the Committee.

Mr. Denzil Davies: Is the hon. and learned Gentleman saying that he is now prepared to look at this matter seriously and to use the tax system, in the new climate of a 60 per cent. top rate, to insist on outlawing perks, as much as it is possible to do so?

Mr. Rees: " Outlawing perks " is a strong term. The point that I have been trying to make to the Committee, however inadequately, is that, highly motivated as the right hon. Gentleman and


his right hon. Friends were, over five years—and it was nothing to do with the climate then—they were not able to perfect a system of dealing with perks. It would be presumptuous of me, even against the altered climate which this Budget has created, to suggest that we shall be that much more successful. All I am saying is that we shall look at the problem. We are not blind to it. We do not find the system of perquisites particularly attractive. Perhaps we are not quite so carried away and emotional about the subject as the right hon. Gentleman and his hon. Friends. We look at it with, perhaps, a rather more worldly eye. [HON. MEMBERS: " Oh."] We know the frailties of human nature, as no doubt in their heart of hearts Opposition Members do, too.
Anyhow, as the right hon. Gentleman was modest enough to say that he would not press his amendment to a Division, I give him the assurance that the Government do not regard the system of perquisites as attractive and do not regard it as one that can be ignored. We shall certainly look at it, although I am not so presumptuous as to imagine that I shall succeed where the right hon. Gentleman has failed over the past five years.

Mr. Tam Dalyell: The hon. and learned Gentleman says that he will be looking at all these matters with a worldly eye. We know that they are not easy and can be difficult. Will there be some kind of serious report back to the House of Commons, when the results of this worldly-eyed look can be considered?

Mr. Rees: I think that the hon. Member will recognise that the results of our scrutiny will be found, or not found, as the case may be, in subsequent Finance Bills. It would be wrong for me to anticipate those. If the hon. Member imagines that he will be able to elicit by a series of shrewd questions what we have in mind, I think that he will realise the constraints. It is much better that these matters be dealt with in a Finance Bill and debated in the proper and traditional way. I am sure that there is nothing between the two sides of the Committee in that respect. If the hon. Member is suggesting that there should be a Green Paper, I do not think that that would be the appropriate way.

Mr. Cook: A new clause.

Mr. Rees: I am not sure that that will be open to the hon. Member for West Lothian (Mr. Dalyell). It probably would not be selected. Dare I say that the hon. Member ought to have applied his mind to it at an early stage? It is a recurring theme. It is nothing new. I am surprised that the hon. Member has not done so, but I do not want to tempt him.
Amendment No. 9 stands in the name of the hon. Member for Colne Valley (Mr. Wainwright). It is designed to reduce the top rate of tax from 83 per cent. to 70 per cent., not 60 per cent. I wonder why the hon. Member put down that amendment. When I saw it, I was tempted to say " Come back, John Pardoe, all is forgiven." Although Mr. Pardoe had his frailties, at least he was a good deal more robust than that. I remember what he said about the tax structure—" a Gothic horror " and " a Gothic nightmare ". Obviously, the hon. Member for Colne Valley believes that the nightmare can be reduced only brick by brick.
We believe in a rather more fundamental approach. I hope that, on reflection, the hon. Member will see that what we propose is in conformity with the great Liberal Budget of 27 March 1977, to which I return so often. The idea then was that the top rate of income tax should come down to 50 per cent. I know that many things have happened to the Liberal Party since 1977, both inside and outside the House of Commons—and I shake my head sadly. But I cannot believe that there has been such a fundamental change of heart that the Liberals can have lost their confidence to such a degree that they believe in this rather timid approach to what is basically a rather important problem.

Mr. Richard Wainwright: The Minister of State was on the Government Front Bench while I was speaking. Perhaps he was not attending. However, I made the point as strongly as I could that it is in the context of this Budget that we object to the singling out of one very small class of extremely wealthy taxpayers when he was not able to carry out, alas, all the other proposals in the Liberal Budget which he has just cited.

Mr. Rees: This is only the first Finance Bill of many which I hope my right


hon. and learned Friend will be commending to the House of Commons. My right hon. and learned Friend has said that we hope to get the basic rate down to 25 per cent. Perhaps the hon. Member for Colne Valley is not so timid. Perhaps he is over-keen, a little too ardent. To him I say " Everything in good time ". But at least this is something to which we should address ourselves. We have been encouraged to do so by things that have been said by his hon. Friends in the past and, indeed, things said by Labour Members. It is really almost embarrassing that there is such a wealth of quotations from which I could draw to remind the Opposition of the views of at least their Front Bench spokesmen on this important subject.
I come now to amendment No. 43, which I apprehend is the amendment which right hon. and hon. Members will wish to press to a Division—although I hope that they will not do so. I still have not determined whether they are really saying that rates of 83 per cent. and 98 per cent. are tolerable and should be part of the United Kingdom tax system. Do they believe that in the right situation these sorts of confiscatory rates should be imposed? If so, they have changed their minds. Perhaps that is why Lord Lever, whose interventions here used to enliven our debates rather more than some of the interventions we have heard this afternoon—although he did not carry the whole of his party with him—chose to accept a peerage. But I do not want to intervene in these internal dissensions of the Labour Party. I know that some matters are rather sensitive at present. I draw a veil over them and come to the substance of the amendment.
The point that we did not elicit from the hon. Member for Norwich, South (Mr. Garrett) was whether he believes that a rate of 83 per cent. on earned income and 98 per cent. on investment income is a proper approach to these problems. Is he of the " howls of anguish " school? I know that many Opposition Members are of that school. I had hoped that we had a rather more sensible, practical and moderate approach from the Opposition Front Bench. Again, I do not want to come between them and their hon. Friends.
I heard the apocalyptic speeches stating that this was the most provocative Budget that hon. Members had ever encountered. Perhaps when the hon. Member for Norwich, South replies to the debate he will say whether he thinks that these are fair rates. We lived through six years of Labour administration from 1964 to 1970, and five years from 1974 to 1979, but the right moment never came. There have been moments, I agree, when there has been a glimmer of hope in the economy, when we have not had a nil growth rate.
I took the point made by the hon. Member for Ormskirk (Mr. Kilroy-Silk), who casts himself in the peculiar role of a Robespierre with a heart of gold. We saw him in both capacities this afternoon. I thought he was saying at one point, before sheering away again, that if it were not for the fact that there was a nil growth rate this might have been permissible. I should like to know what the Opposition Front Bench feel. What are the conditions which they feel are necessary before cuts can be made in the higher rates? To what figures would they bring them down in that situation? I fear that I may be cheated of that hope.
Hon. Members on the Opposition Benches made many observations and speculated on the motives of management and entrepreneurs. Most of the comments would have featured better in a postgraduate thesis. They did not demonstrate, I believe, a first-hand acquaintance with the true circumstances of commercial life. I know that the hon. Member for Norwich, South has some passing acquaintance with it, but he got a little academic. Listening to the hon. Member for Oldham, West I realised that he had been very far from the true sense of commercial activity.

7 pm

Mr. Meacher: I referred to a Financial Times survey.

Mr. Rees: It is always a survey in the Financial Times or some record. My hon. Friends, on the other hand, speak with a good deal of first-hand experience. [HON. MEMBERS: " Oh! "] I am glad to have those unstinted tributes from the Labour Benches for the contributions made by my hon. Friends. They were


notable contributions. The Committee was not impressed by the observations about incentives, but since Opposition Members like statistics I should like to give some figures about the top rates and the point at which they are reached in our competitor countries.
A married man in France reaches the top rate of 54 per cent. at the equivalent of £44,580 a year. A married man in Germany reaches the top rate of 56 per cent. at £67,000 a year. For a married man in Japan, the top rate of 67 per cent., which I agree is higher than the rate that we propose, is reached at £199,130 a year. Against that standard of comparison, is this Administration's proposal corrosive? Is it provocative? Is it unfair? Is it unrealistic? Do we need these apocalyptic visions of doom on the shop floor from Labour Members? It is a long-overdue measure of reform—a corrective of what has been inflicted for so long on the higher echelons of management.
Hon. Members on the Labour Benches, as one would expect, did not concentrate on the higher echelons. They asked what was the impact further down the scale. What they have not appreciated, or what they have chosen to ignore, is that the person lower down the rung will be looking higher and deciding " What is in it for me if I soldier on in the United Kingdom for another 10 or 20 years and resist the blandishments of the Persian Gulf or the Continent of Europe? " Even the hon. Member for Perry Barr presumably hopes to succeed the right hon. Member for Salford, West (Mr. Orme) in due course. He is not considering rambling around dealing with parliamentary questions at his low level. He is looking at the stars. So are people in industry. If one looks at our Continental competitors and considers the whole field of incentives, one realises that clause 5 is a long-overdue and modest measure of reform in our taxation system.
There have been predictable ritual noises from Labour Members. I was disappointed to hear them from the more moderate Members on the Front Bench, for whom I have a genuine respect. I recognise that they have to defer, in the delicate state of their party, to hon. Members below the Gangway. For the good of their reputations, and because I hope that they have the interest of British industry at heart, I trust that they will not

feel disposed to press amendment No. 43 to a Division.

Mr. John Garrett: It is no surprise that this has been a wide-ranging debate. We are dealing with the part of the Finance Bill which hon. Members on the Conservative Benches have described as the heart, the kernel, the intestines and the very soul of the Bill. The Minister of State, with his customary fluency, has not made out a case for the higher tax rate reliefs. I recall from previous Finance Bills that he was opposed to using taxation policy as social engineering, yet this part of the Bill is a massive piece of social engineering, which might better be called jerry-building. It singles out one social class—the very highly paid—for special treatment.
It is clear that since the Budget Statement was first made the Government have got the matter seriously wrong. One can see the realisation creeping over the faces of hon. Members sitting on the Conservative Benches. With every day that passes it is clearer that lower-paid workers get nothing out of the Budget. I can understand how galling Conservative Members must find the fact that the middle class benefit very little, either. Only the very well off—those who have made the top—really get anything worth while. To benefit those top 15,000 or 20,000 taxpayers, we have to proceed through all the miseries and unfairness caused by the increases in VAT and hydrocarbon duties and the cuts in public expenditure that are still to come. It has been a self-defeating exercise—an exercise in futility.
Even if the incentive argument were proven—it was not proven by the Minister—and the aim were to give incentives to middle management, the incentives will run through their fingers like sand. For most middle managers, the money comes in one day and will vanish the next as a result of other decisions in the Finance Bill. My hon. Friend the Member for Edinburgh, Central (Mr. Cook) showed that the keystone has dropped out of this Government's fiscal strategy and that this is recognised by an increasing number of people, particularly those who have to pay the VAT, the petrol tax and interest rates and receive a pittance in income tax relief.
Conservative Members again trotted out the argument about penal taxation on managers. We showed that average


taxation on managers is not penal and that its level is grossly exaggerated by Conservative Members. The Minister of State asked whether I would consider the argument that taxation on middle management should be cut in this way. In present circumstances, present rates, in terms of tax take, seem broadly fair and should not be reduced at the expense of all the other increases placed on the household budget as a result of this Bill.
My hon. Friends for Oldham, West (Mr. Meacher), Edmonton (Mr. Graham), Walsall, North (Mr. Winnick), Swansea, East (Mr. Anderson) and Birmingham, Perry Barr (Mr. Rooker), in excellent speeches, demonstrated the gross unfairness of this section of the Bill. The hon. Member for Canterbury (Mr. Crouch), who is not in his place at the moment, chided me, as someone with a

background in management, for opposing these tax reliefs. But managers at the sharp end of industry, as my hon. Friend the Member for Perry Barr, demonstrated—the operating managers, the plant managers and the export managers—get little benefit, if any, from this part of the Bill.

I have said that a manager would have to earn about £10,000 a year to benefit from the Bill. Today, that figure must be £12,000 a year. Tomorrow, it will be easily £14,000 a year. I was too modest in saying that this was a class Budget. It has been an opening salvo in a new round of the class war. I shall recommend my hon. Friends to support amendment No. 43 in the lobby.

Question put. That the amendment be made:—

The Committee divided: Ayes 225, Noes 285.

Division No. 45]
AYES
[7.9 p.m.


Abse, Leo
Davis, Terry (B'rm'ham, Stechford)
Howell, Rt Hon Denis (B'ham, Sm H)


Adams, Allen
Deakins, Eric
Huckfield, Les


Allaun, Frank
Dean, Joseph (Leeds West)
Hughes, Mark (Durham)


Anderson, Donald
Dempsey, James
Hughes, Robert (Aberdeen North)


Armstrong, Rt Hon Ernest
Dewar, Donald
Hughes, Roy (Newport)


Ashley, Rt Hon Jack
Dixon, Donald
Janner, Hon Greville


Ashton, Joe
Dobson, Frank
Jay, Rt Hon Douglas


Atkinson, Norman (H'gey, Tott'ham)
Dormand, Jack
Johnson, James (Hull West)


Barnett, Guy (Greenwich)
Douglas, Dick
Johnson, Walter (Derby South)


Benn Rt Hon Anthony Wedgwood
Douglas-Mann, Bruce
Jones, Rt Hon Alec (Rhondda)


Bennett, Andrew (Stockport N)
Dubs, Alfred
Jones, Barry (East Flint)


Bidwell, Sydney
Duffy, A. E. P.
Jones, Dan (Burnley)


Booth, Rt Hon Albert
Dunnett, Jack
Kaufman, Rt Hon Gerald


Boothroyd, Miss Betty
Dunwoody, Mrs Gwyneth
Kerr, Russell


Bottomley, Rt Hon Arthur (M'brough)
Eadie, Alex
Kilroy-Silk, Robert


Bradley, Tom
Eastham, Ken
Kinnock, Neil


Bray, Dr Jeremy
Ellis, Raymond (NE Derbyshire)
Lambie, David


Brown, Hugh D. (Provan)
Ellis, Tom (Wrexham)
Lamond, James


Brown, Robert C. (Newcastle W)
Ennals, Rt Hon David
Leadbitter, Ted


Brown, Ron (Edinburgh, Leith)
Evans, loan (Aberdare)
Leighton, Ronald


Callaghan, Rt Hon J. (Cardiff SE)
Evans, John (Newton)
Lewis, Ron (Carlisle)


Callaghan, Jim (Middleton &amp; P)
Ewing, Harry
Lofthouse, Geoffrey


Campbell, Ian
Field, Frank
Lyon, Alexander (York)


Campbell-Savours, Dale
Fitch, Alan
Lyons, Edward (Bradford West)


Canavan, Dennis
Flannery, Martin
Mabon, Rt Hon Dr J. Dickson


Cant, R. B.
Fletcher, Ted (Darlington)
McCartney, Hugh


Carmichael, Neil
Foot, Rt Hon Michael
McDonald, Dr Oonagh


Carter-Jones, Lewis
Forrester, John
McElhone, Frank


Cartwright, John
Foster, Derek
McGuire, Michael (Ince)


Clark, Dr David (South Shields)
Foulkes, George
McKay, Allen (Penistone)


Cocks, Rt Hon Michael (Bristol S)
Freeson, Rt Hon Reginald
McKelvey, William


Cohen, Stanley
Garrett, John (Norwich S)
MacKenzie, Rt Hon Gregor


Coleman, Donald
George, Bruce
Maclennan, Robert


Concannon, Rt Hon J. D.
Gilbert, Rt Hn Dr John
McMahon, Andrew


Conlan, Bernard
Ginsburg, David
McMillan, Tom (Glasgow, Central)


Cook, Robin F.
Golding, John
McNally, Thomas


Cowans, Harry
Graham, Ted
McWilliam, John


Craigen, J. M. (Glasgow, Maryhill)
Grant, George (Morpeth)
Magee, Bryan


Crowther, J. S.
Grant, John (Islington C)
Marshall, David (Gl'sgow, Shettles'n)


Cryer, Bob
Hamilton, W. W. (Central Fife)
Marshall, Dr Edmund (Goole)


Cunliffe, Lawrence
Harrison, Rt Hon Walter
Marshall, Jim (Leicester South)


Cunningham, George (Islington S)
Healey, Rt Hon Denis
Martin, Michael (Gl'gow, Springb'rn)


Cunningham, Dr John (Whitehaven)
Heffer, Eric S.
Mason, Rt Hon Roy


Dalyell, Tam
Hogg, Norman (E Dunbartonshire)
Meacher, Michael


Davidson, Arthur
Holland, Stuart (L'beth, Vauxhall)
Mikardo, Ian


Davies, Rt Hon Denzll (Llanelli)
Home Robertson, John
Millan, Rt Hon Bruce


Davies, E. Hudson (Caerphilly)
Homewood, William
Miller, Dr M. S. (East Kilbride)


Davies, Ifor (Gower)
Hooley, Frank
Mitchell, Austin (Grimsby)


Davis, Clinton (Hackney Central)
Horam, John
Mitchell, R. C. (Soton, Itchen)




Morris, Rt Hon Alfred (Wythenshawe)
Robertson, George
Thomas, Dr Roger (Carmarthen)


Morris, Rt Hon Charles (Openshaw[...]
Robinson, Geoffrey (Coventry NW)
Thorne, Stan (Preston South)


Morris, Rt Hon John (Aberavon)
Rodger, Rt Hon William
Tilley, John


Morton, George
Rooker, J. W.
Torney, Tom


Mulley, Rt Hon Frederick
Ross, Ernest (Dundee West)
Urwin, Rt Hon Tom


Newens, Stanley
Rowlands, Ted
Varley, Rt Hon Eric G.


Oakes, Rt Hon Gordon
Ryman, John
Wainwright, Edwin (Dearne Valley)


Ogden, Eric
Sandelson, Neville
Walker, Rt Hon Harold (Doncaster)


O'Halloran, Michael
Sever, John
Watkins, David


O'Neill, Martin
Sheerman, Barry
Weetch, Ken


Orme, Rt Hon Stanley
Sheldon, Rt Hon Robert (A'ton-u-L)
Wellbeloved, James


Owen, Rt Hon Dr David
Shore, Rt Hon Peter (Step and Pop)
Welsh, Michael


Palmer, Arthur
Short, Mrs Renée
White, Frank R. (Bury &amp; Radcliffe)


Park, George
Silkin, Rt Hon John (Deptford)
White, James (Glasgow, Pollok)


Parker, John
Silverman, Julius
Whitlock, William


Parry, Robert
Skinner, Dennis
Willey, Rt Hon Frederick


Pendry, Tom
Snape, Peter
Williams, Sir Thomas (Warrington)


Powell, Raymond (Ogmore)
Soley, Clive
Wilson, Rt Hon Sir Harold (Huyton)


Prescott, John
Spriggs, Leslie
Winnick, David


Price, Christopher (Lewisham West)
Stallard, A. W.
Woodall, Alec


Race, Reg
Stoddart, David
Woolmer, Kenneth


Radice, Giles
Stott, Roger
Wrigglesworth, Ian


Rees, Rt Hon Merlyn (Leeds South)
Strang, Gavin
Young, David (Bolton East)


Richardson, Miss Jo
Straw, Jack



Roberts, Albert (Normanton)
Taylor, Mrs Ann (Bolton West)
TELLERS FOR THE AYES:


Roberts, Allan (Bootle)
Thomas, Jeffrey (Abertillery)
Mr. James Hamilton and


Roberts, Ernest (Hackney North)
Thomas, Mike (Newcastle East)
Mr. James Tinn.


Roberts, Gwilym (Cannock)






NOES


Adley, Robert
Cormack, Patrick
Hampson, Dr Keith


Alexander, Richard
Corrie, John
Hannam, John


Amery, Rt Hon Julian
Costain, A. P.
Hastings, Stephen


Ancram, Michael
Cranborne, Viscount
Havers, Rt Hon Sir Michael


Arnold, Tom
Critchley, Julian
Hawkins, Paul


Aspinwall, Jack
Crouch, David
Hawksley, Warren


Atkins Robert (Preston North)
Dean, Paul (North Somerset)
Hayhoe, Barney


Atkinson, David (B'mouth East)
Dickens, Geoffrey
Henderson, Barry


Baker, Nicholas (North Dorset)
Dodsworth, Geoffrey
Heseltine, Rt Hon Michael


Beaumont-Dark, Anthony
Dorrell, Stephen
Hill, James


Beith, A. J.
Douglas-Hamilton, Lord James
Hogg, Hon Douglas (Grantham)


Bell, Ronald
Dunn, Robert (Dartford)
Holland, Philip (Carlton)


Bendall, Vivian
Durant, Tony
Hooson, Tom


Benyon, Thomas (Abingdon)
Dykes, Hugh
Hordern, Peter


Benyon, W. (Buckingham)
Eden, Rt Hon Sir John
Howe, Rt Hon Sir Geoffrey


Berry, Hon Anthony
Edwards, Rt Hon N. (Pembroke)
Howell, Rt Hon David (Guildford)


Best, Keith
Eggar, Timothy
Howell, Ralph (North Norfolk)


Bevan, David Gilroy
Emery, Peter
Howells, Geraint


Biffen, Rt Hon John
Eyre, Reginald
Hunt, David (Wirral)


Biggs-Davison, John
Fairbairn, Nicholas
Hunt, John (Ravensbourne)


Blackburn, John
Fairgrieve, Russell
Hurd, Hon Douglas


Bonsor, Sir Nicholas
Faith, Mrs Sheila
Irving, Charles (Cheltenham)


Boscawen, Hon Robert
Farr, John
Jessel, Toby


Bottomley, Peter (Woolwich West)
Fell, Anthony
Johnson Smith, Geoffrey


Bowden, Andrew
Fenner, Mrs Peggy
Johnston, Russell (Inverness)


Braine, Sir Bernard
Finsberg, Geoffrey
Jopling, Rt Hon Michael


Bright, Graham
Fletcher, Alexander (Edinburgh N)
Joseph, Rt Hon Sir Keith


Brinton, Tim
Fletcher-Cooke, Charles
Kaberry, Sir Donald


Brittan Leon
Fookes, Miss Janet
Kllfedder, James A.


Brocklebank-Fowler, Christopher
Forman, Nigel
Kimball, Marcus


Brotherton, Michael
Fowler, Rt Hon Norman
King, Rt Hon Tom


Brown, Michael (Brigg &amp; Sc'thorpe)
Fox, Marcus
Kitson, Sir Timothy


Browne, John (Winchester)
Fraser, Rt Hon H. (Stafford &amp; St)
Knight, Mrs Jill


Bruce-Gardyne, John
Fraser, Peter (South Angus)
Knox, David


Bryan, Sir Paul
Fry, Peter
Lamont, Norman


Buck, Antony
Gardner, Edward (South Fylde)
Lang, Ian


Budgen, Nick
Garel-Jones, Tristan
Langford-Holt, Sir John


Bulmer, Esmond
Glyn, Dr Alan
Latham, Michael


Burden, F. A.
Goodhart, Philip
Lawson, Nigel


Butcher, John
Goodlad, Alastair
Lee, John


Cadbury, Jocelyn
Gorst, John
Le Merchant, Spencer


Carlisle, Kenneth (Lincoln)
Gow, Ian
Lennox-Boyd, Hon. Mark


Carlisle, Rt Hon Mark (Runcorn)
Gower, Sir Raymond
Lester, Jim (Beeston)


Chalker, Mrs Lynda
Gray, Hamish
Lewis, Kenneth (Rutland)


Channon, Paul
Grieve, Percy
Lloyd, Ian (Havant &amp; Waterloo)


Chapman, Sydney
Griffiths, Eldon (Bury St Edmunds)
Lloyd, Peter (Fareham)


Churchill, W. S.
Griffiths, Peter (Portsmouth N)
Loveridge, John


Clark, Hon. Alan (Plymouth, Sutton)
Grimond, Rt Hon J.
Luce, Richard


Clark, Dr William (Croydon South)
Grist, Ian
McCusker, H.


Clarke, Kenneth (Rushcliffe)
Grylls, Michael
Macfarlane, Neil


Clegg, Walter
Gummer, John Selwyn
MacGregor, John


Cockeram, Eric
Hamilton, Hon Archie (Eps'm&amp;Ew'll)
MacKay, John (Argyll)


Colvin, Michael
Hamilton, Michael (Salisbury)
Macmillan, Rt Hon M. (Farnham)






McNair-Wilson, Michael (Newbury)
Pattie, Geoffrey
Steen, Anthony


McNair-Wilson, Patrick (New Forest)
Pawsey, James
Stevens, Martin


Madel, David
Penhaligon, David
Stewart, Ian (Hitchin)


Major. John
Peyton, Rt Hon John
Stewart, John (East Renfrewshire)


Marland, Paul
Pollock, Alexander
Stokes, John


Marlow, Tony
Powell, Rt Hon J. Enoch (S Down)
Tapsell, Peter


Marshall, Michael (Arundel)
Price, David (Eastleigh)
Taylor, Robert (Croydon NW)


Marten, Neil (Banbury)
Prior, Rt Hon James
Tebbit, Norman


Mates, Michael
Proctor, K. Harvey
Temple-Morris, Peter


Mather, Carol
Pym, Rt Hon Francis
Thomas, Rt Hon Peter (Hendon S)


Maude, Rt Hon Angus
Raison, Timothy
Thompson, Donald


Mawby, Ray
Rathbone, Tim
Townend, John (Bridlington)


Mawhinney, Dr Brian
Rees, Peter (Dover and Deal)
Townsend, Cyril D. (Bexleyheath)


Maxwell-Hyslop, Robin
Renton, Tim
Trippler, David


Mayhew, Patrick
Rhodes James, Robert
van Straubenzee, W. R.


Mellor, David
Ridley, Hon Nicholas
Viggers, Peter


Meyer, Sir Anthony
Ridsdale, Julian
Waddington, David


Miller, Hal (Bromsgrove &amp; Redditch)
Rifkind, Malcolm
Wainwright, Richard (Colne Valley)


Mills, Iain (Meriden)
Roberts, Michael (Cardiff NW)
Wakeham, John


Mills, Peter (West Devon)
Roberts, Wyn (Conway)
Waldegrave, Hon William


Miscampbell, Norman
Ross, Stephen (Isle of Wight)
Walker, Rt Hon Peter (Worcester)


Mitchell, David (Basingstoke)
Rost, Peter
Walker-Smith, Rt Hon Sir Derek


Moate, Roger
Sainsbury, Hon Timothy
Waller, Gary


Molyneaux, James
St. John-Stevas, Rt Hon Norman
Walters, Dennis


Monro, Hector
Shaw, Giles (Pudsey)
Ward, John


Montgomery, Fergus
Shaw, Michael (Scarborough)
Watson, John


Moore, John
Shelton, William (Streatham)
Wells, John (Maidstone)


Morris, Michael (Northampton, S[...]h)
Shepherd, Colin (Hereford)
Wells, Bowen (Hert'rd &amp; Stev'nage)


Morrison, Hon Charles (Devizes)
Shepherd, Richard(Aldridge-Br'hills)
Wheeler, John


Morrison, Hon Peter (City of Chester)
Shersby, Michael
Whitelaw, Rt Hon William


Mudd, David
Silvester, Fred
Whitney, Raymond


Murphy, Christopher
Sims, Roger
Wickenden, Keith


Myles, David
Skeet, T. H. H.
Wiggin, Jerry


Neale, Gerrard
Smith, Dudley (War. and Leam'ton)
Wilkinson, John


Neubert, Michael
Speed, Keith
Williams, Delwyn (Montgomery)


Newton, Tony
Speller, Tony
Winterton, Nicholas


Nott, Rt Hon John
Spence, John
Wolfson, Mark


Onslow, Cranley
Spicer, Michael (S Worcestershire)
Young, Sir George (Acton)


Oppenheim, Rt Hon Mrs Sally
Sproat, Iain
Younger, Rt Hon George


Page, Rt Hon R. Graham (Crosby)
Squire, Robin



Parkinson, Cecil
Stainton, Keith
TELLERS FOR THE NOES


Parris, Matthew
Stanbrook, Ivor
Mr. John Cope and


Patten, Christopher (Bath)
Stanley, John
Mr. Peter Brooke.


Patten, John (Oxford)

Question accordingly negatived.

Mr. John Garrett: I beg to move amendment No. 44, in page 3, line 20, leave out paragraph (c).

The Temporary Chairman: With this we may discuss the following amendments:

No. 25, in page 3, leave out from below' in line 19 to the end of line 22.

No. 26, in page 3, line 21, leave out ' £5,000 ' and insert £10,000 '.

No. 27, in page 3, line 22, leave out 15 per cent.' and insert 5 per cent.'.

No. 28, in page 3, line 29, at end insert:
' (1A) No investment income accruing to a person of state retirement age shall be subject to surcharge under subsection (1)(c) of this section.'.

Mr. Garrett: Paragraph (c) deals with the treatment of investment income. Its effect is to reduce the number of people who are liable to pay investment income surcharge from about 700,000 to about 300,000—at a forecast loss of

revenue of £21 million in 1979–80 and £201 million in a full year.
These beneficiaries will be allowed £5,000 of investment income free of the 15 per cent. tax surcharge. Given present-day yields, that is the level of income which would arise from a portfolio of £75,000—a substantial amount of wealth even today.
In his Budget Statement the Chancellor of the Exchequer said that the surcharge bites at too low a level of income and, as half the surcharge is paid by people over 65, it falls particularly heavily on pensioners. For that half I assume that the Chancellor was not using the argument of a greater spur to executive initiative and effort. We are, therefore, in the emotional area of justice to pensioners and other deserving groups who are thought to be unjustly taxed, even though they have about £75,000 put away. In other words, we are back to the priorities of the Government as expressed in the Bill.
In an earlier debate we referred to the Government's fiscal and social priorities. We can re-examine them briefly


tonight. For ordinary pensioners without a sizeable nest egg the picture is not so rosy as it is for the beneficiaries of this part of the Bill. Retirement pensions will be increased in November to £37·30 for a married couple, but pensioners have been subjected to the sell-out of the century in the refusal of the Government to link retirement pensions of ordinary pensioners to wages or the cost of living, whichever is the higher. As the country staggers forward into higher and higher inflation, these pensioners surely will lose out.
For pensioners on a State retirement pension or a small occupational pension without an investment income the future holds out heavy cuts. Retirement pensioners use the provisions of the Welfare State to a disproportionate degree. We know only the broad outlines of the cuts in public expenditure. We have to wait for the public expenditure survey at the end of the year for the rest of it. It is like waiting for the other boot to drop.
The Government's total strategy will be revealed then. It will be the " new beginning " as the Chancellor said. We can expect cuts of 10 per cent. in many social spending programmes to achieve an overall target of 6 per cent. or 7 per cent. in cuts in existing public expenditure survey levels.
This will fall on the backs of the less well off, many of whom are pensioners. What we are sure of are cuts in social services which do much for the elderly. We can bet that the Tory shire counties, many of which already fell far short of recommended levels of provision, will itch to put the axe into these services.
We can also confidently expect that the National Health Service, which devotes so much of its resources to the elderly, will suffer. The Government's pledge not to reduce the Health Service has been repeated in the House, but that does not square with the Chancellor's statement that cash limits are not to be raised to cover prices which rise higher than those originally provided for this year. Cash limits are likely not to take full account of rises in NHS labour costs, so that the service will suffer a real cut in resources and services.
What protection will the Government offer pensioners from such cuts in the

services that they need most? The Government argument is that one group of pensioners—those with a fair amount of wealth—need protection. But what about the overwhelming majority of pensioners?
Half of the beneficiaries from this tax reduction are not pensioners. They are wealthy or very wealthy people. Again, we are involved in social justice. Ordinary wage and salary earners, many of whom are in poverty, are expected to work for wages that will be subjected to a ferocious erosion of purchasing power through inflation, much of it created by the Government, and yet they will see that the wealthy, drawing investment income, receive special treatment. These arrangements will not strike many people as just.
Over the years there has been a growing swell of argument from the Tory Benches for the abolition of investment income surcharge, which was introduced by Lord Barber in 1971. Something like it has existed since early this century. We have heard arguments for its total abolition to encourage small businesses, encourage investment in British industry, help agriculture, remove distortions, and put Britain into line with other countries.
That argument has gained ground in the Conservative Party. This measure is the first step towards the abolition of investment income surcharge. The Conservative Party document " The Right Approach to the Economy " foreshadowed the abolition of this surcharge. It stated that
 We are increasingly doubtful about the wisdom of retaining any kind of Investment Income Surcharge ".
This is the first step. Perhaps the Minister will confirm the Government's policy on this important issue. I am sure that my right hon. and hon. Friends will resist any movement down that road. It is our belief that the taxable capacity of low yielding wealth, which escapes taxation altogether, should be brought into revenue by the introduction of a wealth tax, such as exists in many other countries.
7.30 p.m.
The phasing out of investment income surcharge makes for justice only if it is accompanied by the phasing in of a wealth tax. The report of the Select Committee on the wealth tax said that there


was a strong case for abolishing the investment income surcharge and relying on a wealth tax with a relatively low threshold as the instrument for taxing capital.
Of course it is too much to expect the party of property to bring in a wealth tax. What that party will do is to abolish the surcharge in the interests of administrative efficiency, or justice for pensioners, or some other inegalitarian pretext. This is really big money hiding behind a screen of pensioners and widows. The top 5 per cent. of people in this country own 56 per cent. of its personal wealth. In terms of wealth we are still a very unequal society. On those grounds alone, in my view, it would be wrong to endorse this provision to give relief to people who are, in general, very wealthy.

Mr. Nicholas Winterton: I shall not do what I consider the hon. Member for Norwich, South (Mr. Garrett) did and make almost a Second Reading speech with brief reference to the specifics dealt with in the amendment.
I direct the attention of the Committee to amendments Nos. 25, 26, 27 and 28, which are being taken with the main amendment. Unlike the hon. Member for Norwich, South, I wish to encourage people to create wealth in order to provide for themselves and their families. I wish this wealth to be used not only during their working lives but particularly so that people may provide for themselves in their retirement. I specifically refer to amendment No. 28, which reads:
 No investment income accruing to a person of state retirement age shall be subject to surcharge under subsection (1)(c) of this section.
I have received numerous representations since the publication of the Finance Bill both from retired people in my own constituency and from others. They indicate to me that the surcharge on investment income is a deterrent to people saving during their working lives in order to provide a satisfactory income for themselves and perhaps, even in their retirement, for certain dependents. I hope that my right hon. Friend on the Treasury Bench will appreciate my objective in tabling these amendments.
Unlike the Member for Norwich, South, I believe that those who save during their working lives—those who are responsible and thrifty—are doing a service not only to themselves and their families but to the country. The money thus saved is often invested in building societies, but perhaps even more commonly it is invested in industry.
I am sure that even the hon. Gentleman will agree that the one thing that industry in this country has lacked in recent years is a satisfactory level of investment. I believe it is because the creation of wealth has been too highly taxed in this country and that, as has been pointed out, a surcharge on investment income was introduced by a former Conservative Government. People have asked themselves why they should be responsible and thrifty and bother to make provision for themselves and their families in retirement out of money which they have saved while at work. They ask why, if they have been particularly thrifty, and their investments have proved sound and have increased in value over the years, should they pay a higher rate of tax on the income they would achieve in retirement by way of this surcharge.
I hope that the hon. Member for Norwich, South is listening to me, because I believe that this issue clearly demonstrates the difference in philosophy between the Opposition and the Government. The Opposition have been critical of the Budget. Perhaps one should not have expected anything else. The Labour Party was fairly destructive in government, and I am sure that it will be extremely destructive in opposition. That is its wont. It makes a better Opposition than a Government.
We now have a Budget which is changing the direction of the country. It is a tough Budget, and one which, I accept, will create a great deal of discomfort for a number of people for a limited period. If the strategy behind this Budget is allowed to see the light of day—which I believe will happen because of the courage that will be displayed by the Government—I think that we will see a new dawn, which will bring to the people of this country—whatever the level of their income—a new prosperity and a new freedom with responsibilty. That will encourage people to make provision for


themselves. I have highlighted the purpose of my amendments and I say straight away to my hon. Friends that no doubt they will achieve some reaction from the Opposition.
These are probing amendments. I say that because I know that my right hon. Friend on the Treasury Bench is worried that I may well press this matter to a Division. However, in putting his case the hon. Member for Norwich, South so persuaded me that he was wrong that I could not possibly join him and his right hon. and hon. Friends in the Division Lobby to vote against my party. The overall strategy behind this Budget is long overdue.
If we are to encourage people to make provision for themselves, is it right that they should pay a surcharge, above the standard rate of tax, on levels of investment income in excess of a particular figure? I want to create wealth in this country. I do not care particularly whether chairmen of companies will be £1.000, £2,000 or £3,000 a week better off as a result of the Budget. I believe that everybody will be better off. The Budget will create a climate in which investment will once again take place in this country.
Investment leads to employment. We have, as the Opposition will admit, an unacceptable level of unemployment. If we can encourage people in any way to save rather than to spend irresponsibly and to invest in industry to create employment, will that not be to the benefit of the people of this country? One of the great problems that the last Government faced was the rising level of unemployment. We know that the previous Administration was relatively successful in hiding the true level of unemployment, because of short-term job creation schemes and other projects. Those projects camouflaged the true level of unemployment. Do we not genuinely want sound investment that will really reduce the unacceptable level of unemployment? Surely we want sound investment that creates employment and reduces the unacceptable level of unemployment.
I do not seek to pander to a deserving group—the retired. Too often political parties pay a great deal of lip service to these groups, but they use them as political pawns. That is wrong. It does the

House no service for parties to behave in that way. Nevertheless, I have included them because these are the people who have set an example in the past. They are people who have successfully invested and accumulated considerable wealth. In the course of that acquisition they have built up a portfolio of stocks and shares and have invested money that has perhaps created new jobs, not only directly by allowing a manufacturing company to take on more workers, but indirectly by permitting that company to provide work in the industries that supply it.

Mr. Meacher: How does the hon. Member know that the capital which leads to the imposition of investment incomes surcharge is earned and saved and is not, in the majority of cases, inherited?

Mr. Winterton: That point will widen the debate, but if you allow me to pursue the matter, Mr. English, I should be happy to answer the question. I am the first to admit that an element of the money from which I seek to remove the effects of surcharge could be inherited, but in that case I say " Bravo ", because one of the strongest motivations for men and women is not only that they should provide for themselves during their working lives and for their retirement but that they should be able to hand something on to their children.
The hon. Member for Oldham, West (Mr. Meacher) displays great lack of knowledge of the basic instinct of men and women. They wish to provide for themselves, for their families, and for the next generation of their families. They want their children to do the things that they could not do. I want to make generous provision for my children—I have three—[Interruption.] I thought I heard hon. Members say that there could be more. I am being diverted, Mr. English—

The Temporary Chairman (Mr. Michael English): Order. I think that the hon. Member for Macclesfield (Mr. Winterton) is diverting the Committee by discussing the basic instincts of men and women. Perhaps he would like to do that outside the Chamber at a later hour.

Mr. Winterton: One of those basic instincts, Mr. English, is reproduction. I agree that we were almost launching into a debate on that subject.
The creation of wealth by individuals is good while it is being used by those individuals for their benefit and to make a better life for them. However, it often has a beneficial effect in providing employment for other people. Money generates money. Therefore I do not step back one inch from saying that some of the benefits of my amendments could well be applied to wealth that is passed from father to son.
I hope that my objective will be taken on board by the Government and that the surcharge will be phased out. My party believes in the creation of wealth. We want as many people as possible to create it. I do not want the " nanny " State to provide people with everything they want from the cradle to the grave. I want people to assume responsibilities for providing for themselves, and my modest amendments will perhaps tempt the Government a little further down the path to removing what I consider to be an anachronism and a deterrent to the true creation of wealth.
7.45 p.m.
The Opposition have made great play about the impact of the Budget on the living standards of the elderly and the retired. The hon. Member for Norwich, South failed to say that although the increase in the old-age pension will not be implemented until November—that has been the habit of successive Governments—we have doubled the increase that was originally proposed by the Labour Government. We have taken account of the likely increase in the cost of living as a result of the Budget.
I shall not be tempted to discuss in detail the rise in the cost of fuel and petrol because much of that is beyond the control of the Government. But if some Labour Members, particularly those below the Gangway, had not been so quick to get rid of the Shah of Iran I do not believe we should have been facing the serious situation we have today—although I do not blame hon. Gentlemen for that.

The Temporary Chairman: I sincerely hope that the hon. Member for Macclesfield will keep away from foreign affairs and restrict himself to domestic income tax.

Mr. Winterton: I believe that investment abroad will have a bearing on the investment income surcharge, Mr. English.
I conclude with a plea to my right hon. Friend the Chief Secretary. I have tabled these probing amendments because it is the duty of a Member of Parliament to reflect here the views represented to him by important bodies speaking on behalf of large sections of the community, by individuals, and particularly by constituents. I have received a number of letters from constituents who feel that people could well be deterred from making satisfactory provision for themselves in their retirement because their income will be subjected to the surcharge. I am not certain what sum the Exchequer receives from the surcharge each year, but I believe that its deterrent effect far outweighs any benefit that may accrue to the Government from it.
My right hon. Friend the Chief Secretary may be unable to give ground on this matter during the deliberations on the Bill. However, my party believes in the creation of wealth for the benefit of all and it encourages people to provide for themselves. Therefore I hope that the Government will take on board the message I have endeavoured to put across so that people will not be deterred from making provision for their families and particularly for their retirement.

Mr. Dalyell: The hon. Member for Macclesfield (Mr. Winterton) asserted that his Front Bench was worried about the amendments. I suspect that Treasury Ministers have subjects of greater weight to worry about than amendments put down by the hon. Member for Macclesfield, but I take it that they are probing amendments.
I am curious to know, however, how many letters the hon. Gentleman has had from people outside his constituency saying that their saving decisions are affected by the investment income surcharge. If he cares to interrupt to tell me how many letters he has received, as he claims, from people outside his constituency, I shall be interested to hear. I see that he does not have anything to say, so I shall let that point go.

Mr. Nicholas Winterton: I am waiting to hear what the hon. Gentleman has to say.

Mr. Dalyell: I simply do not believe that decisions on saving are to any wide extent affected by that consideration. They may be affected by many other considerations, but, frankly, I think it preposterous to assert that they are affected by that one. The hon. Gentleman still does not wish to interrupt me, so I shall come to my principal question.
One of the less satisfactory features of our procedure in taking Finance Bills on the Floor of the House is that it is a little difficult to come back on Ministers after they have spoken. If I make a short speech on this occasion I shall do so wishing to reserve the right to come back, if necessary, after the Chief Secretary has spoken, because I am curious about this Government decision.
It will be within the Chief Secretary's recollection, I believe, as it is certainly within mine, that when the Labour Party was last in opposition and the Finance Bill was being taken in Committee upstairs there was considerable discussion in which, if my memory serves me aright, the present Secretary of State for Social Services and the right hon. Member for Worthing (Mr. Higgins), then Financial Secretary to the Treasury, defended the investment income surcharge as a matter of principle. They argued against some of their hon. Friends then below the Gangway and—again, if my memory serves me aright—in the face of criticism from the then Member for South Angus, now the hon. Member for Knutsford (Mr. Bruce-Gardyne), in defence of the principle of the investment income surcharge.
I come now to my question. If it was right in the early 1970s, why is it now wrong? Any party can change its mind, any Government can change their mind—I not complain about that—but I think it worth asking what has changed in basic philosophy over the intervening years. I ask that because some of us find this a strange priority, given that there are so many other causes. I do not quite see the point of this provision, and I shall with that comment end my speech, looking forward with interest to the Chief Secretary's reply.

Mr. Meacher: I wish to touch on the three points which the hon. Member for Macclesfield (Mr. Winterton) raised, on each of which, in my view, he has come

to a profoundly wrong conclusion. However, instead of addressing myself to ideology or philosophy, as the hon. Gentleman did, I wish to look at the mechanics of this proposal a little more closely. My reason for opposing it is that, as one looks closely into it, one sees no defensible rationale for what is proposed, except that it is yet another big bonanza for the rich.
First, only a very small number of people will gain anything at all from what the Government propose. Secondly, even among those who gain, the benefit is concentrated overwhelmingly on those with already very high incomes who need relief least. I say that having taken the precaution to put a question to the Treasury, which was answered on 2 July, asking what was the gain to individuals from raising the investment income surcharge threshold. The cost of doing it is £200 million, and, in company with my hon. Friend the Member for West Lothian (Mr. Dalyell), I cannot regard this as a priority for the use of funds in that quantity.
I have attempted to work out the gain per head among those paying investment surcharge at the different bands of income stated in the Treasury's answer. Although I am the first to admit that my figures are subject to some margin of error, I calculate the matter in this way.
First, as the Treasury says, those with incomes below £2,000 a year get nothing at all. Secondly, for those with incomes between £2,000 and £5,000 the gain is about £5 a year, which is pretty neglibile. Then—this is where the increase starts—for those with incomes from £5,000 to £10,000 the gain is about £27 a year. Then, for those with incomes from £10,000 to £20,000 a year the gain is £85 per head per year. Next, we really reach the jackpot: for those with incomes over £20,000—we are talking here of a rich elite of about 128,000 people paying investment income surcharge—the gain is about £234 a year. Thus, it is heavily concentrated on the rich.
It seems to me that the justification could be on three grounds, all of which were mentioned by the hon. Member for Macclesfield. First, I think that about one-third of the recipients of the gain from raising the threshold are pensioners, and therefore it could be regarded as a


measure to help the old. Secondly, it may be said that it will in some way assist investment. Thirdly, as the hon. Gentleman said, it can be regarded as an encouragement to thrift, allowing people to keep more of the investment income from capital which they have built up. Those seem to me to be the only possible justifications, but all of them, in my view, are entirely fallacious, or they stand on extremely weak ground, as I shall now show.
First, if the aim is to help pensioners, why not increase pensions to ensure that the benefit goes to all pensioners, not just to some of the rich ones? After all, this is entirely in line with the Government's philosophy in considering other benefits for pensioners. For example, we have recently had before the House again the question of free television licences. The Government have refused the concession on the ground that some of the benefit would go to better-off pensioners. The name of Lord Montgomery always tends to be mentioned in this context, even though he is now deceased, but he has a son. The argument is that the benefit would go also to rich pensioners who do not need it and it would therefore be much better—I understand this argument—to use any moneys that are available to increase the pension itself so that, again in line with the Government's argument about freedom of choice, pensioners may themselves decide how to spend it.
If that is the argument—I recognise it as a perfectly defensible argument—why are the Government now hell-bent on increasing a benefit to pensioners which will go only to a few, and only to the richest at that, giving absolutely no help to the ordinary pensioner? How is that consistent with refusing free television licences, which would overwhelmingly benefit the ordinary non-rich pensioner? I am not, therefore, much impressed by the argument that it is designed to assist the pensioner.
Secondly, perhaps the real motive is to assist in promoting investment, as the hon. Member for Macclesfield suggested. The trouble with that argument—my hon. Friend the Member for West Lothian hinted at it—lies in the marginality of the extra tax represented by the investment income surcharge which must be taken as discouraging extra investment. Of

course, it is not that. It is, rather, the lack of prospects of increased demand in the economy and hence the lack of prospects of profitability which are the discouragement.
I believe it to be one of the accepted nostrums of the City and, if I may hazard a guess, of the Treasury as well, that there is no lack of funding in this country for industrial investment, but the problem is much more a lack of incentive for companies to deploy available funds for industrial investment. It is a problem of the economic environment, and who can blame companies when, after the Budget increased the MLR, even blue chip concerns are now having to pay about 17 per cent. for their extra borrowings? So raising the investment income surcharge threshold will have an utterly negligible impact on investment, and I cannot believe that anyone would seriously hold that out as justification.
I turn, then, to what I assume must be the real reason for this proposal. It is to encourage thrift, to encourage the build-up of capital by individuals, an aim which is near and dear to the hearts of hon. Members on the Government Benches. This may sound very appealing, of course, until one looks more closely into the proposal and its effects. The proposal does not help the property-owning democracy. The Treasury answer indicates that those with incomes below £2,000 will receive nothing at all, whilst about 93 per cent. of the benefit is concentrated on those with incomes above the national average. That is not a direct or effective way of promoting a property-owning democracy, if that is really the motive.
8 p.m.
The point of my question to the hon. Member for Macclesfield is that the measure does not promote thrift. From surveys to find out the origins of capital, it appears that the majority of those owning sizeable assets have obtained them by inheritance rather than by personal savings. I take the hon. Gentleman's point that he, nevertheless, would still think it justified to reduce tax on inherited wealth, but that is a different argument from encouraging thrift. The main effect of the measure will be to reduce taxation of the income yield on gains that are essentially purely windfall gains.
To secure an income yield of around £5,000 means having a capital stock of around £100,000. That is the top side of what might be earned or saved in the course of an ordinary working life. There are exceptions, but it is not generally beyond that. Yet the majority of beneficiaries under the proposal will be those with an investment income yield of over £5,000. The proposal will overwhelmingly, though not exclusively, benefit those with inherited capital rather than those who earn or save it. That shows that there is no defensible rationale for the proposal. There is only the indefensible one of piling yet further considerable gains on the already rich.

Mr. Nicholas Winterton: I have not intervened earlier, because I have been listening to the hon. Gentleman's argument with great care. Will he direct one or two comments to the small business? He spoke of accumulating a portfolio of around £100,000 in the course of a lifetime and producing an annual income of around £5,000 or a little more. The smaller business man is affected by the provision and by the investment income surcharge. Does he agree that many small businesses have produced more than £100,000 in the course of a lifetime and that many smaller business men, who could provide jobs for many hundreds, and perhaps ultimately thousands, of people could, in a small way, be deterred from making future investment because that could mean that they would be paying a heavy price by way of investment income surcharge?

Mr. Meacher: The hon. Gentleman is going far too wide. There are arguments for easing the tax burden on small businesses. That was recognised by the previous Labour Administration with the so-called Lever amendments, which raised the VAT threshold for small businesses and in a variety of ways eased the burden of capital transfer tax. Perhaps more is justified to promote increased investment by small businesses. To suggest that raising the investment income surcharge threshold will make more than a minute difference to that particular area is entirely to misread the effect of the proposal, which cannot be justified on that basis.
I submit that the proposal is a further, and absolutely unnecessary, division in an

already Tory-divided Britain. On that basis it should be thrown out.

Mr. John Townend: Those who favour investment income surcharge forget one or two points. I speak as the managing director of a private company. Investment income surcharge distorts the financial decision of private companies. Because of its incidence, it is often more advantageous for a company to declare no dividends but to take its profit out by way of directors' remuneration. That distorts what should be an impartial financial decision. In many cases it is to the detriment of small minority shareholders. The start that has been made in the Budget—which to me is only a first step to the eventual abolition of investment income surcharge—is most important.
Whilst there are high rates of taxation, and a high 15 per cent. investment income surcharge in addition, many people, instead of looking for pure investment to provide jobs and a return on their money, are looking for quick capital gains. That distorts the financial situation. For both those reasons I support the Government's proposals, and I hope that before long they will take on board the amendment of my hon. Friend the Member for Macclesfield (Mr. Winterton).

The Chief Secretary to the Treasury (Mr. John Biffen): It has been a short but entertaining debate, mounted on two fronts. The official Opposition amendment, seeking to delete the paragraph relating to investment income surcharge would, as the hon. Member for Norwich, South (Mr. Garrett) said, give an addition to the revenue of over £200 million and would have quite an impact on the proposed reductions in the Budget. The four amendments in the name of my hon. Friend the Member for Macclesfield (Mr. Winterton) seek to diminish the remaining burden, as it will be under the Budget, for those paying investment income surcharge by between £100 million and £200 million a year, depending upon the amendment.
I mention three cardinal points about the investment income surcharge as it now stands in the Bill. First, the proposal is made against the background of a pledge to review capital taxation that will incorporate the capital transfer tax and the capital gains tax. Clearly, such


a review could not conceivably have been encompassed in the few weeks between the general election and the presentation of the Budget. I say to my hon. Friend the Member for Bridlington (Mr. Townend) that it is precisely because of the difficulties to which he referred, such as the distorting of financial decisions, that such a review is fundamentally required.
The hon. Member for Oldham, West (Mr. Meacher) is not entirely fair when he sees the investment income surcharge as being essentially a problem or a characteristic of the wealthy rentier class. The investment income surcharge is mentioned by practically every small business organisation, be it the Association of Independent Businesses, the Union of Independent Companies or the CBI smaller businesses council, precisely because of the financial points referred to by my hon. Friend the Member for Bridlington. That in no way detracts from the validity of the points made by the hon. Member for Oldham, West on the basis of the information provided to him by way of a parliamentary answer.
We have taken the proposed reductions in capital transfer tax contained in the Budget as an interim reform. That touches immediately upon the points raised by the hon. Member for West Lothian (Mr. Dalyell), who made the very pertinent observation that it seems like only yesterday, though it was in fact in 1973, that my right hon. Friend the Member for Worthing (Mr. Higgins) and my right hon. Friend who is now Secretary of State for Social Services were defending an investment income surcharge which was part of the Conservative financial policy of that Parliament. I do not think that I can give the hon. Gentleman an answer that will satisfy him. However, I hope that my answer will persuade him not to speak twice. In this uncertain world that is about as much as one dare hope for.
Many feel that indexation is desirable in our taxation policy. I am mildly agnostic about its virtues. I think that it can be overdone. However, to make everything nice and cosy and all-party, we have the Rooker-Wise amendment, which is probably the most famous testimonial to indexation.
Let us consider the investment income surcharge that was being defended by my right hon. Friends in 1973. At that time the threshold was £2,000. If that had been indexed, we would now be talking of a surcharge threshold of £4,650. If that were rounded to the nearest £1,000, we would be talking about an investment income surcharge threshold of £5,000.

Mr. Denzil Davies: I apologise for taking the right hon. Gentleman back to the argument of the hon. Member for Bridlington (Mr. Townend) about the distortion of financial decisions in small companies, especially as they concern minority shareholders where the dividend comes as investment income. The subsection does not confine its benefits to that type of organisation. I should have had greater sympathy with the Government if they had tried to do something to remove that type of distortion. However, the subsection deals with investment in stock market companies and does not meet the argument of the hon. Member for Bridlington.

Mr. Biffen: It is true that it is a rough-and-ready virtue. We had to produce a Budget in weeks rather than months. The right hon. Gentleman has underlined the necessity of having the wider reform to which we are committed.
In introducing our interim reform we have tried to simplify by having a single rate. We have lifted the threshold. The result is that 550,000 people have been removed from tax. It now applies to only 300,000 persons. The Committee should know that 250,000 elderly persons have been removed from tax and only 150,000 remain. It is a modest measure but, given the time available, I believe that it will prove to be constructive.
My hon. Friend the Member for Macclesfield described amendments Nos. 25, 26, 27 and 28 as probing in character. He promised that he would confine himself to the narrow points of debate appropriate to a properly conducted debate in Committee on the Finance Bill. That was a heroic premise for someone who eventually managed to stretch his argument to effusive references to the Shah of Iran. Probing though the amendments may be, and even if my hon. Friend were determined to be even more heroic, I cannot advise the Committee to accept the


amendments. They would deprive the Revenue of about £100 million, and possibly more. For a Government with a Budget pivoted on a borrowing requirement of £8,000 million, there is no scope for the loss of any revenue even in so enticing a cause as that advanced by my hon. Friend.
An inquiry will be conducted by my right hon. and learned Friend the Chancellor of the Exchequer. Its purpose will be to bring about a more equitable system of capital taxation. I shall ensure that my hon. Friend's remarks to that end are put before my right hon. and learned Friend.
I turn to amendment No. 44, argued for by the hon. Member for Norwich, South, who spoke on behalf of the official Opposition. As best I can judge, there is a philosophical divide between the Government and the Opposition. The arguments that the hon. Gentleman advanced were put even more sharply by the hon. Member for Oldham, West. The hon. Member for Norwich, South talked about those who are not pensioners who are in receipt of investment income. He described them as either wealthy or very wealthy. That reflects a set of values that I do not think is shared by my right hon. and hon. Friends.
8.15 p.m.
The truth is that in any society there is a challenge and an uneasy relationship between freedom and equality. On the Opposition Benches there is a strong premium on equality. On the Government Benches there is a strong premium on the side of freedom. One of the consequences is how we judge investment income. Is it to be judged as meriting a discriminatory tax treatment, and if so, how much? There is an argument to be advanced on whether it is inherited or saved money, but I see the argument based not so much on the economics of fine tuning—namely, how we encourage savings, how we treat income that comes from savings and the panoply of arguments that comes from the econometricians—but on social judgment. That is whether investment income, savings and private accumulations of wealth are to be championed or to be tamed. We say that they should be championed.

Mr. John Garrett: This has been a brief debate on a subject to which, no

doubt, we shall return on a number of future occasions, given that the modern Tory is well and truly into lashing out money to the well-off.
It was interesting that the Chief Secretary went on about the Tory vision of freedom. However, the only terms in which he referred to freedom were those of money. In passing, the right hon. Gentleman referred to £200 million a year in tax reliefs as modest. I hope that he will say as much when the Government cut such sums, or even more, from the education budget in the next public expenditure White Paper.
The part of the Bill to which the amendments relate is concerned with and benefits those with wealth. Half of them may be pensioners, and some but not all of them may have saved for their old age and accumulated sizeable sums. The other half are plain wealthy people. This is a first step towards the Conservative Party ending many decades of a taxation system that has rightly, in our view, placed an additional tax on investment income. My hon. Friend the Member for West Lothian (Mr. Dalyell) asked some penetrating questions. I do not know whether he is fully satisfied with the answers that he received. He will be able to ask further questions on other occasions.
The hon. Member for Macclesfield (Mr. Winterton), after accusing me of making a Second Reading speech, took the Committee on a tour d'horizon, which embraced the Shah of Iran as well as basic human instincts in general and his own in particular. I was flattered that he chose to address most of his remarks to me rather than to his right hon. Friend the Chief Secretary before withdrawing his amendments.
The hon. Gentleman hit the nail on the head when he said that amendment No. 44 illustrated the contrast between the philosophies of the major parties. That is true. All our amendments highlight that contrast. We have tried throughout to demonstrate the inherent unfairness, injustice and provocativeness of the good old Tory principle of helping the well off. Their aim is to give the better off the most help and to do nothing for those who really need help.
My hon. Friend the Member for Oldham, West (Mr. Meacher) clearly demonstrated the nature of this part of the Bill.
Its purpose is to help the wealthy. That is what it is all about. How often do we have to spell that out? How often do we have to spell out the basic, central injustice of the Bill? I suggest that we have to spell it out by taking the amendment to a Division.

The Temporary Chairman: It is only fair to point out that the hon. Member

for Macclesfield (Mr. Winterton) did not withdraw his amendments, because he had not moved them since he was not entitled to move them; only one amendment can be moved at any one time.

Question Put, That the amendment be made:—

The Committee divided: Ayes 231, Noes 286.

Division No. 46]
AYES
[8.20 p.m.


Abse, Leo
Ellis, Tom (Wrexham)
Maclennan, Robert


Adams, Allen
Ennals, Rt Hon David
McMahon, Andrew


Allaun, Frank
Evans, Ioan (Aberdare)
McMillan, Tom (Glasgow, Central)


Anderson, Donald
Evans, John (Newton)
McNally, Thomas


Armstrong, Rt Hon Ernest
Ewing, Harry
McWilliam, John


Ashley, Rt Hon Jack
Field, Frank
Magee, Bryan


Ashton, Joe
Fitch, Alan
Marshall, David (Gl'sgow, Shettles'n)


Atkinson, Norman (H'gey, Tott'ham)
Flannery, Martin
Marshall, Dr Edmund (Goole)


Barnett, Guy (Greenwich)
Fletcher, Ted (Darlington)
Marshall, Jim (Leicester South)


Barnett, Rt Hon Joel (Heywood)
Foot, Rt Hon Michael
Martin, Michael (Gl'gow, Springb'rn)


Benn, Rt Hon Anthony Wedgwood
Forrester, John
Mason, Rt Hon Roy


Bennett, Andrew (Stockport N)
Foster, Derek
Meacher, Michael


Bidwell, Sydney
Foulkes, George
Mellish, Rt Hon Robert


Booth, Rt Hon Albert
Freeson, Rt Hon Reginald
Mikardo, Ian


Boothroyd, Miss Betty
Garrett, John (Norwich S)
Millan, Rt Hon Bruce


Bottomley, Rt Hon Arthur (M'brough)
George, Bruce
Miller, Dr M. S. (East Kilbride)


Bradley, Tom
Ginsburg, David
Mitchell, Austin (Grimsby)


Bray, Dr Jeremy
Golding, John
Mitchell, R. C. (Soton, Itchen)


Brown, Hugh D. (Provan)
Gourlay, Harry
Morris, Rt Hon Alfred (Wythenshawe)


Brown, Robert C. (Newcastle W)
Graham, Ted
Morris, Rt Hon Charles (Openshaw)


Brown, Ron (Edinburgh, Leith)
Grant, George (Morpeth)
Morris, Rt Hon John (Aberavon)


Callaghan, Rt Hon J. (Cardiff SE)
Grant, John (Islington C)
Moyle, Rt Hon Roland


Callaghan, Jim (Middleton &amp; P)
Hamilton, James (Bothwell)
Mulley, Rt Hon Frederick


Campbell, Ian
Hamilton, W. W. (Central Fife)
Newens, Stanley


Campbell-Savours, Dale
Harrison, Rt Hon Walter
Oakes, Rt Hon Gordon


Canavan, Dennis
Healey, Rt Hon Denis
Ogden, Eric


Cant, R. B.
Heffer, Eric S.
O'Halloran, Michael


Carmichael, Neil
Hogg, Norman (E Dunbartonshire)
O'Neill, Martin


Carter-John, Lewis
Holland, Stuart (L'beth, Vauxhall)
Orme, Rt Kon Stanley


Cartwright, John
Home Robertson, John
Palmer, Arthur


Clark, Dr David (South Shields)
Homewood, William
Park, George


Cocks, Rt Hon Michael (Bristol S)
Hooley, Frank
Parker, John


Cohen, Stanley
Horam, John
Parry, Robert


Concannon, Rt Hon J. D.
Howell, Rt Hon Denis (B'ham, Sm H)
Pendry, Tom


Conlan, Bernard
Huckfield, Les
Powell, Raymond (Ogmore)


Cook, Robin F.
Hughes, Mark (Durham)
Prescott, John


Cowans, Harry
Hughes, Robert (Aberdeen North)
Price, Christopher (Lewisham West)


Craigen, J. M. (Glasgow, Maryhill)
Hughes, Roy (Newport)
Race, Reg


Crowther, J. S.
Janner, Hon Greville
Radice, Giles


Cryer, Bob
Johnson, James (Hull West)
Rees, Rt Hon Merlyn (Leeds South)


Cunliffe, Lawrence
Johnson, Walter (Derby South)
Richardson, Miss Jo


Cunningham, George (Islington S)
Jones, Rt Hon Alec (Rhondda)
Roberts, Albert (Normanton)


Cunningham, Dr John (Whitehaven)
Jones, Barry (East Flint)
Roberts, Allan (Bootle)


Dalyell, Tam
Jones, Dan (Burnley)
Roberts, Ernest (Hackney North)


Davidson, Arthur
Kaufman, Rt Hon Gerald
Roberts, Gwilym (Cannock)


Davies, Rt Hon Denzil (Llanelli)
Kerr, Russell
Robertson, George


Davies, E. Hudson (Caerphilly)
Kilroy-Silk, Robert
Robinson, Geoffrey (Coventry NW)


Davies, Ifor (Gower)
Kinnock, Neil
Rodgers, Rt Hon William


Davis, Clinton (Hackney Central)
Lambie, David
Rooker, J. W.


Davis, Terry (B'rm'ham, Stechford)
Lamborn, Harry
Ross, Ernest (Dundee West)


Deakins, Eric
Lamond, James
Rowlands, Ted


Dean, Joseph (Leeds West)
Leadbitter, Ted
Ryman, John


Dempsey, James
Leighton, Ronald
Sandelson, Neville


Dewar, Donald
Lestor, Miss Joan (Eton &amp; Slough)
Sever, John


Dixon, Donald
Lewis, Ron (Carlisle)
Sheerman, Barry


Dobson, Frank
Lofthouse, Geoffrey
Sheldon, Rt Hon Robert (A'ton-u-L)


Dormand, Jack
Lyon. Alexander (York)
Shore, Rt Hon Peter (Step and Pop)


Douglas, Dick
Lyons, Edward (Bradford West)
Short, Mrs Renée


Douglas-Mann, Bruce
Mabon, Rt Hon Dr J. Dickson
Silkin, Rt Hon John (Deptford)


Dubs, Alfred
McCartney, Hugh
Silkin, Rt Hon S. C. (Dulwich)


Duffy, A. E. P.
McDonald, Dr Oonagh
Silverman, Julius


Dunnett, Jack
McElhone, Frank
Skinner, Dennis


Dunwoody, Mrs Gwyneth
McGuire, Michael (Ince)
Snape, Peter


Eadie, Alex
McKay, Allen (Penistone)
Soley, Clive


Eastham, Ken
McKelvey, William
Spriggs, Leslie


Ellis, Raymond (NE Derbyshire)
MacKenzie, Rt Hon Gregor
Stallard, A. W.




Stoddart, David
Urwin, Rt Hon Tom
Williams, Sir Thomas (Warrington)


Stott, Roger
Varley, Rt Hon Eric G.
Wilson, Rt Hon Sir Harold (Huyton)


Strang, Gavin
Wainwright, Edwin (Dearne Valley)
Winnick, David


Straw, Jack
Walker, Rt Hon Harold (Doncaster)
Woodall, Alec


Taylor, Mrs Ann (Bolton West)
Watkins, David
Woolmer, Kenneth


Thomas, Dafydd (Merioneth)
Weetch, Ken
Wrigglesworth, Ian


Thomas, Jeffrey (Abertillery)
Wellbeloved, James
Wright, Sheila


Thomas, Mike (Newcastle East)
Welsh, Michael
Young, David (Bolton East)


Thomas, Dr Roger (Carmarthen)
White, Frank R. (Bury &amp; Radcliffe)



Thorne, Stan (Preston South)
White, James (Glasgow, Pollok)
TELLERS FOR THE AYES:


Tilley, John
Whitlock, William
Mr. Donald Coleman and


Tinn, James
Willey, Rt Hon Frederick
Mr. George Morton.


Torney, Tom






NOES


Adley, Robert
Dorrell, Stephen
Kaberry, Sir Donald


Alexander, Richard
Douglas-Hamilton, Lord James
Kilfedder, James A.


Amery, Rt Hon Julian
Dover, Denshore
Kimball, Marcus


Ancram, Michael
Dunn, Robert (Dartford)
King, Rt Hon Tom


Arnold, Tom
Durant, Tony
Kitson, Sir Timothy


Aspinwall, Jack
Dykes, Hugh
Knight, Mrs Jill


Atkins Robert (Preston North)
Eden, Rt Hon Sir John
Knox, David


Atkinson, David (B'mouth East)
Edwards, Rt Hon N. (Pembroke)
Lamont, Norman


Baker, Kenneth (St. Marylebone)
Eggar, Timothy
Lang, Ian


Baker, Nicholas (North Dorset)
Emery, Peter
Langford-Holt, Sir John


Beaumont-Dark, Anthony
Eyre, Reginald
Latham, Michael


Beith, A. J.
Fairbairn, Nicholas
Lawson, Nigel


Bell, Ronald
Fairgrieve, Russell
Lee, John


Bendall, Vivian
Faith, Mrs Sheila
Le Merchant, Spencer


Benyon, Thomas (Abingdon)
Farr, John
Lennox-Boyd, Hon. Mark


Benyon, W. (Buckingham)
Fell, Anthony
Lester, Jim (Beeston)


Berry, Hon Anthony
Fenner, Mrs Peggy
Lewis, Kenneth (Rutland)


Best, Keith
Finsberg, Geoffrey
Lloyd, Ian (Havant &amp; Waterloo)


Bevan, David Gilroy
Fletcher, Alexander (Edinburgh N)
Lloyd, Peter (Fareham)


Biffen, Rt Hon John
Fletcher-Cooke, Charles
Loveridge, John


Biggs-Davison, John
Fookes, Miss Janet
Lyell, Nicholas


Blackburn, John
Forman, Nigel
Macfarlane, Neil


Body, Richard
Fowler, Rt Hon Norman
MacKay, John (Argyll)


Bonsor Sir Nicholas
Fox, Marcus
McNair-Wilson, Michael (Newbury)


Boscawen, Hon Robert
Fraser, Rt Hon H. (Stafford &amp; St)
McNair-Wilson, Patrick (New Forest)


Bottomley, Peter (Woolwich West)
Fraser, Peter (South Angus)
McQuarrie, Albert


Bowden, Andrew
Fry, Peter
Madel, David


Braine, Sir Bernard
Gardner, Edward (South Fylde)
Major, John


Bright, Graham
Garel-Jones, Tristan
Marland, Paul


Brinton, Tim
Glyn, Dr Alan
Marlow, Tony


Brittan Leon
Goodlad, Alastair
Marshall, Michael (Arundel)


Brocklebank-Fowler, Christopher
Gorst, John
Marten, Nell (Banbury)


Brooke, Hon Peter
Gow, Ian
Mates, Michael


Brotherton, Michael
Gower, Sir Raymond
Maude, Rt Hon Angus


Brown, Michael (Brigg &amp; Sc'thorpe)
Gray, Hamish
Mawby, Ray


Browne, John (Winchester)
Grieve, Percy
Mawhinney, Dr Brian


Bruce-Gardyne, John
Griffiths, Eldon (Bury St Edmunds)
Maxwell-Hyslop, Robin


Bryan, Sir Paul
Griffiths, Peter (Portsmouth N)
Mayhew, Patrick


Buchanan-Smith, Hon Alick
Grist, Ian
Mellor, David


Buck, Antony
Grylls, Michael
Meyer, Sir Anthony


Budgen, Nick
Gummer, John Selwyn
Miller, Hal (Bromsgrove &amp; Redditch)


Bulmer, Esmond
Hamilton, Hon Archie (Eps'm&amp;Ew'll)
Mills, Iain (Meriden)


Burden, F. A.
Hamilton, Michael (Salisbury)
Mills, Peter (West Devon)


Butcher, John
Hampson, Dr Keith
Miscampbell, Norman


Butler, Hon Adam
Hannam, John
Mitchell, David (Basingstoke)


Cadbury, Jocelyn
Havers, Rt Hon Sir Michael
Moate, Roger


Carlisle John (Luton West)
Hawkins, Paul
Molyneaux, James


Carlisle, Kenneth (Lincoln)
Hawksley, Warren
Monro, Hector


Carlisle, Rt Hon Mark (Runcorn)
Henderson, Barry
Montgomery, Fergus


Chalker, Mrs Lynda
Heseltine, Rt Hon Michael
Moore, John


Channon, Paul
Hill, James
Morris, Michael (Northampton, Sth)


Chapman, Sydney
Hogg, Hon Douglas (Grantham)
Morrison, Hon Charles (Devizes)


Clark, Hon. Alan (Plymouth, Sutton)
Holland, Philip (Carlton)
Morrison, Hon Peter (City of Chester)


Clark, Dr William (Croydon South)
Hooson, Tom
Mudd, David


Clarke, Kenneth (Rushcliffe)
Hordern, Peter
Murphy, Christopher


Clegg, Walter
Howe, Rt Hon Sir Geoffrey
Myles, David


Cockeram, Eric
Howell, Rt Hon David (Guildford)
Neale, Gerrard


Colvin, Michael
Howell, Ralph (North Norfolk)
Neubert, Michael


Cope, John
Howells, Geraint
Newton, Tony


Cormack, Patrick
Hunt, David (Wirral)
Nott, Rt Hon John


Corrie, John
Hunt, John (Ravensbourne)
Onslow, Cranley


Costain, A. P.
Hurd, Hon Douglas
Oppenheim, Rt Hon Mrs Sally


Cranborne, Viscount
Irving, Charles (Cheltenham)
Page, Rt Hon R. Graham (Crosby)


Critchley, Julian
Jessel, Toby
Parkinson, Cecil


Crouch, David
Johnson Smith, Geoffrey
Parris, Matthew


Dean, Paul (North Somerset)
Johnston, Russell (Inverness)
Patten, Christopher (Bath)


Dickens, Geoffrey
Jopling, Rt Hon Michael
Patten, John (Oxford)


Dodsworth, Geoffrey
Joseph, Rt Hon Sir Keith
Pattie, Geoffrey






Pawsey, James
Silvester, Fred
van Straubenzee, W. R.


Penhaligon, David .
Sims, Roger
Viggers, Peter


Peyton, Rt Hon John
Skeet, T. H. H.
Waddington, David


Pollock, Alexander
Smith, Dudley (War. and Leam'ton)
Wainwright, Richard (Colne Valley)


Porter, George
Speed, Keith
Wakeham, John


Powell, Rt Hon J. Enoch (S Down)
Speller, Tony
Waldegrave, Hon William


Price, David (Eastleigh)
Spence, John
Walker, Rt Hon Peter (Worcester)


Prior, Rt Hon James
Spicer, Michael (S Worcestershire)
Walker-Smith, Rt Hon Sir Derek


Proctor, K. Harvey
Sproat, Iain
Wall, Patrick


Pym, Rt Hon Francis
Squire, Robin
Waller, Gary


Raison, Timothy
Stainton, Keith
Ward, John


Rathbone, Tim
Stanbrook, Ivor
Watson, John


Rees, Peter (Dover and Deal)
Stanley, John
Wells, John (Maidstone)


Renton, Tim
Steen, Anthony
Wells, Bowen (Hert'rd &amp; Stev'nage)


Rhodes James, Robert
Stevens, Martin
Wheeler, John


Ridley, Hon Nicholas
Stewart, Ian (Hitchin)
Whitney, Raymond


Ridsdale, Julian
Stewart, John (East Renfrewshire)
Wickenden, Keith


Rifkind, Malcolm
Stokes, John
Wiggin, Jerry


Roberts, Michael (Cardiff NW)
Tapsell, Peter
Wilkinson, John


Roberts, Wyn (Conway)
Taylor, Robert (Croydon NW)
Williams, Delwyn (Montgomery)


Ross, Stephen (Isle of Wight)
Tebbit, Norman
Winterton, Nicholas


Rost, Peter
Temple-Morris, Peter
Wolfson, Mark


Sainsbury, Hon Timothy
Thatcher, Rt Hon Mrs Margaret
Young, Sir George (Acton)


Shaw, Giles (Pudsey)
Thompson, Donald
Younger, Rt Hon George


Shaw, Michael (Scarborough)
Thornton, Malcolm



Shelton, William (Streatham)
Townend, John (Bridlington)
TELLERS FOR THE NOES


Shepherd, Colin (Hereford)
Townsend, Cyril D. (Bexleyheath)
Mr. Carol Mather and


Shepherd. Richard (Aldridge-Br'hills)
Trippier, David
Mr. John MacGregor.


Shersby, Michael

Question accordingly negatived.

THE CHAIRMAN,: THE CHAIRMAN, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto,

forthwith put the Question, pursuant to Standing Order No. 48 (Debate on Clause or Schedule standing part). That the clause stand part of the Bill:—

The Committee divided: Ayes 276. Noes 230.

Division No. 47]
AYES
[8.35 p.m.


Adley, Robert
Budgen, Nick
Fell, Anthony


Aitken, Jonathan
Bulmer, Esmond
Fenner, Mrs Peggy


Alexander, Richard
Burden, F. A.
Finsberg, Geoffrey


Amery, Rt Hon Julian
Butcher, John
Fletcher, Alexander (Edinburgh N)


Ancram, Michael
Butler, Hon Adam
Fookes, Miss Janet


Arnold, Tom
Cadbury, Jocelyn
Forman, Nigel


Aspinwall, Jack
Carlisle, John (Luton West)
Fowler, Rt Hon Norman


Atkins, Robert (Preston North)
Carlisle, Kenneth (Lincoln)
Fox, Marcus


Atkinson, David (B'mouth, East)
Carlisle, Rt Hon Mark (Runcorn)
Fraser, Rt Hon H. (Stafford &amp; St)


Baker, Kenneth (St. Marylebone)
Channon, Paul
Fraser, Peter (South Angus)


Baker, Nicholas (North Dorset)
Chapman, Sydney
Fry, Peter


Beaumont-Dark, Anthony
Clark, Hon Alan (Plymouth, Sutton)
Gardner, Edward (South Fylde)


Beith, A. J.
Clark, Dr William (Croydon South)
Garel-Jones, Tristan


Bell, Ronald
Clarke, Kenneth (Rushcliffe)
Glyn, Dr Alan


Bendall, Vivian
Clegg, Walter
Goodhart, Philip


Benyon, Thomas (Abingdon)
Cockeram, Eric
Goodlad, Alastair


Benyon, W. (Buckingham)
Colvin, Michael
Gorst, John


Berry, Hon Anthony
Cormack, Patrick
Gow, Ian


Best, Keith
Corrie, John
Gower, Sir Raymond


Bevan, David Gilroy
Costain, A. P.
Gray, Hamish


Biffen, Rt Hon John
Cranborne, Viscount
Grieve, Percy


Biggs-Davison, John
Critchley, Julian
Griffiths, Eldon (Bury St Edmunds)


Blackburn, John
Crouch, David
Griffiths, Peter (Portsmouth N)


Body, Richard
Dean, Paul (North Somerset)
Grist, Ian


Bonsor, Sir Nicholas
Dickens, Geoffrey
Grylls, Michael


Boscawen, Hon Robert
Dodsworth, Geoffrey
Gummer, John Selwyn


Bottomley, Peter (Woolwich West)
Dorrell, Stephen
Hamilton, Hon Archie (Eps'm&amp;Ew'll)


Bowden, Andrew
Douglas-Hamilton, Lord James
Hamilton, Michael (Salisbury)


Braine, Sir Bernard
Dover, Denshore
Hampson, Dr Keith


Bright, Graham
Dunn, Robert (Dartford)
Hannam, John


Brinton, Tim
Durant, Tony
Havers, Rt Hon Sir Michael


Brittan, Leon
Dykes, Hugh
Hawkins, Paul


Brocklebank-Fowler, Christopher
Eden, Rt Hon Sir John
Hawksley, Warren


Brooke, Hon Peter
Edwards, Rt Hon N. (Pembroke)
Henderson, Barry


Brotherton, Michael
Eggar, Timothy
Heseltine, Rt Hon Michael


Brown, Michael (Brigg &amp; Sc'thorpe)
Emery, Peter
Hill, James


Browne, John (Winchester)
Eyre, Reginald
Hogg, Hon Douglas (Grantham)


Bruce-Gardyne, John
Fairbairn, Nicholas
Holland, Philip (Carlton)


Bryan, Sir Paul
Fairgrieve, Russell
Hooson, Tom


Buchanan-Smith, Hon Alick
Faith, Mrs Sheila
Hordern, Peter


Buck, Antony
Farr, John
Howe, Rt Hon Sir Geoffrey




Howell, Ralph (North Norfolk)
Mitchell, David (Basingstoke)
Skeet, T. H. H.


Howells, Geraint
Moate, Roger
Smith, Dudley (War. and Leam'ton)


Hunt, David (Wirral)
Molyneaux, James
Speed, Keith


Hunt, John (Ravensbourne)
Monro, Hector
Speller, Tony


Hurd, Hon Douglas
Montgomery, Fergus
Spence, John


Irving, Charles (Cheltenham)
Morris, Michael (Northampton, Sth)
Spicer, Michael (S Worcestershire)


Jessel, Toby
Morrison, Hon Charles (Devizes)
Sproat, Iain


Johnson Smith, Geoffrey
Morrison, Hon Peter (City of Chester)
Squire, Robin


Johnston, Russell (Inverness)
Mudd, David
Stainton, Keith


Jopling, Rt Hon Michael
Murphy, Christopher
Stanbrook, Ivor


Kilfedder, James A.
Myles, David
Stanley, John


Kimball, Marcus
Neale, Gerrard
Steen, Anthony


King, Rt Hon Tom
Neubert, Michael
Stevens, Martin


Kitson, Sir Timothy
Newton, Tony
Stewart, Ian (Hitchin)


Knight, Mrs Jill
Nott, Rt Hon John
Stewart, John (East Renfrewshire)


Knox, David
Onslow, Cranley
Stokes, John


Lamont, Norman
Oppenheim, Rt Hon Mrs Sally
Tapsell, Peter


Langford-Holt, Sir John
Page, Rt Hon R. Graham (Crosby)
Taylor, Robert (Croydon NW)


Latham, Michael
Parkinson, Cecil
Tebbit, Norman


Lawson, Nigel
Parris, Matthew
Temple-Morris, Peter


Lee, John
Patten, John (Oxford)
Thatcher, Rt Hon Mrs Margaret


Le Merchant, Spencer
Pattie, Geoffrey
Thompson, Donald


Lennox-Boyd, Hon Mark
Pawsey, James
Thornton, George


Lewis, Kenneth (Rutland)
Penhaligon, David
Townend, John (Bridlington)


Lloyd, Ian (Havant &amp; Waterloo)
Percival, Sir Ian
Townsend, Cyril D (Bexleyheath)


Lloyd, Peter (Fareham)
Peyton, Rt Hon John
Trippier, David


Loveridge, John
Pink, R. Bonner
Trotter, Neville


Lyell, Nicholas
Porter, George
van Straubenzee, W. R.


Macfarlane, Neil
Powell, Rt Hon J. Enoch (S Down)
Viggers, Peter


MacKay, John (Argyll)
Price, David (E[...]stleigh)
Waddington, David


McNair-Wilson, Michael (Newbury)
Prior, Rt Hon James
Wainwright, Richard (Colne Valley)


McNair-Wilson, Patrick (New Forest)
Proctor, K. Harvey
Wakeham, John


McQuarrie, Albert
Pym, Rt Hon Francis
Waldegrave, Hon William


Madel, David
Raison, Timothy
Walker-Smith, Rt Hon Sir Derek


Major, John
Rathbone, Tim
Waller, Gary


Marland, Paul
Rees, Peter (Dover and Deal)
Ward, John


Marlow, Tony
Renton, Tim
Watson, John


Marshall, Michael (Arundel)
Rhodes James, Robert
Wells, John (Maidstone)


Marten, Neil (Banbury)
Ridsdale, Julian
Wells, Bowen (Hert'rd &amp; Stev'nage)


Mates, Michael
Rifkind, Malcolm
Wheeler, John


Mather, Carol
Roberts, Michael (Cardiff NW)
Whitney, Raymond


Maude, Rt Hon Angus
Roberts, Wyn (Conway)
Wickenden, Keith


Mawby, Ray
Ross, Stephen (Isle of Wight)
Wiggin, Jerry


Mawhinney, Dr Brian
Rost, Peter
Williams, Delwyn (Montgomery)


Maxwell-Hyslop, Robin
Sainsbury, Hon Timothy
Winterton, Nicholas


Mayhew, Patrick
Shaw, Giles (Pudsey)
Young, Sir George (Acton)


Mellor, David
Shaw, Michael (Scarborough)
Younger, Rt Hon George


Meyer, Sir Anthony
Shelton, William (Streatham)



Miller, Hal (Bromsgrove &amp; Redditch)
Shepherd, Richard (Aldridge-Br'hills)
TELLERS FOR THE AYES


Mills, Iain (Meriden)
Shersby, Michael
Mr. John Cope and


Mills, Peter (West Devon)
Silvester, Fred
Mr. John MacGragor.


Miscampbell, Norman
Sims, Roger





NOES


Abse, Leo
Cartwright, John
Dubs, Alfred


Adams, Allen
Clark, Dr David (South Shields)
Duffy, A. E. P.


Allaun, Frank
Cocks, Rt Hon Michael (Bristol S)
Dunnett, Jack


Anderson, Donald
Coleman, Donald
Dunwoody, Mrs Gwyneth


Armstrong, Rt Hon Ernest
Concannon, Rt Hon J. D.
Eadie, Alex


Ashley, Rt Hon Jack
Conlan, Bernard
Eastham, Ken


Ashton, Joe
Cook, Robin F.
Ellis, Raymond (NE Derbyshire)


Atkinson, Norman (H'gey, Tott'ham)
Cowans, Harry
Ellis, Tom (Wrexham)


Barnett, Guy (Greenwich)
Craigen, J. M. (Glasgow, Maryhill)
Ennals, Rt Hon David


Barnett, Rt Hon Joel (Heywood)
Crowther, J. S.
Evans, Ioan (Aberdare)


Benn, Rt Hon Anthony Wedgwood
Cryer, Bob
Evans, John (Newton)


Bennett, Andrew (Stockport N)
Cunliffe, Lawrence
Ewing, Harry


Bidwell, Sydney
Cunningham, George (Islington S)
Field, Frank


Booth, Rt Hon Albert
Cunningham, Dr John (Whitehaven)
Fitch, Alan


Boothroyd, Miss Batty
Dalyell, Tam
Flannery, Martin


Bottomley, Rt Hon Arthur (M'brough)
Davidson, Arthur
Fletcher, Ted (Darlington)


Bradley, Tom
Davies, Rt Hon Denzll (Llanelli)
Fool, Rt Hon Michael


Bray, Dr Jeremy
Davies, E. Hudson (Caerphilly)
Forrester, John


Brown, Hugh D. (Provan)
Davies, Ifor (Gower)
Foster, Derek


Brown, Robert C. (Newcastle W)
Davis, Clinton (Hackney Central)
Foulkes, George


Brown, Ron (Edinburgh, Leith)
Davis, Terry (B'rm'ham, Stechford)
Freeson, Rt Hon Reginald


Callaghan, Rt Hon J. (Cardiff SE)
Deakins, Eric
Garrett, John (Norwich S)


Callaghan, Jim (Middleton &amp; P)
Dempsey, James
George, Bruce


Campbell, Ian
Dewar, Donald
Ginsburg, David


Campbell-Savours, Dale
Dixon, Donald
Golding, John


Canavan, Dennis
Dobson, Frank
Gourlay, Harry


Cant, R. B.
Dormand, Jack
Graham, Ted


Carmichael, Neil
Douglas, Dick
Grant, George (Morpeth)


Carter-Jones, Lewis
Douglas-Mann, Bruce
Grant, John (Islington C)






Hamilton, James (Bothwell)
Magee, Bryan
Sheldon, Rt Hon Robert (A'ton-u-L)


Hamilton, W. W. (Central Fife)
Marshall, David (Gl'sgow, Shettles'n)
Shore, Rt Hon Peter (Step and Pop)


Harrison, Rt Hon Walter
Marshall, Dr Edmund (Goole)
Short, Mrs Renée


Healey, Rt Hon Denis
Martin, Michael (Gl'gow, Springb'rn)
Silkin, Rt Hon John (Deptford)


Heffer, Eric S.
Mason, Rt Hon Roy
Silkin, Rt Hon S. C. (Dulwich)


Hogg, Norman (E Dunbartonshire)
Meacher, Michael
Silverman, Julius


Holland, Stuart (L'beth, Vauxhall)
Mellish, Rt Hon Robert
Skinner, Dennis


Home Robertson, John
Mikardo, Ian
Snape, Peter


Homewood, William
Millan, Rt Hon Bruce
Soley, Clive


Hooley, Frank
Miller, Dr M. S. (East Kilbride)
Spriggs, Leslie


Horam, John
Mitchell, Austin (Grimsby)
Stallard, A. W.


Howell, Rt Hon Denis (B'ham, Sm'H)
Mitchell, R. C. (Soton, Itchen)
Stoddart, David


Huckfield, Les
Morris, Rt Hon Alfred (Wythenshawe)
Stott, Roger


Hughes, Mark (Durham)
Morris, Rt Hon Charles (Openshaw)
Strang, Gavin


Hughes, Robert (Aberdeen North)
Morris, Rt Hon John (Aberavon)
Straw, Jack


Hughes, Roy (Newport)
Morton, George
Taylor, Mrs Ann (Bolton West)


Janner, Hon Greville
Moyle, Rt Hon Roland
Thomas, Dafydd (Merioneth)


Johnson, James (Hull West)
Mulley, Rt Hon Frederick
Thomas, Jeffrey (Abertillery)


Johnson, Walter (Derby South)
Newens, Stan[...]ey
Thomas, Mike (Newcastle East)


Jones, Rt Hon Alec (Rhondda)
Oakes, Rt Hon Gordon
Thomas, Dr Roger (Carmarthen)


Jones, Barry (East Flint)
Ogden Eric
Thorne, Stan (Preston South)


Jones, Dan (Burnley)
O'Halloran, Michael
Tilley, John


Kaufman, Rt Hon Gerald
O'Neill, Martin
Tinn, James


Kerr, Russell
Orme, Rt Hon Stanley
Torney, Tom


Kilroy-Silk, Robert
Palmer, Arthur
U[...]win, Rt Hon To[...]


Kinnock, Neil
Park, George
Varley, Rt Hon Eric G.


Lambie, David
Parker, John
Wainwright, Edwin (Dearne Valley)


Lamborn, Harry
Parry, Robert
Walker, Rt Hon Harold (Doncaster)


Lamond, James
Pendry, Tom
Watkins, David


Leadbitter, Ted
Powell, Raymond (Ogmore)
Weetch, Ken


Leighton, Ronald
Price, Christopher (Lewisham West)
Wellbeloved, James


Lestor, Miss Joan (Eton &amp; Slough)
Race, Reg
Welsh, Michael


Lewis, Ron (Carlisle)
Radice, Giles
White, Frank R. (Bury &amp; Radcliffe)


Lofthouse, Geoffrey
Rees, Rt Hon Merlyn (Leeds South)
White, James (Glasgow, Pollok)


Lyon, Alexander (York)
Richardson, Miss Jo
Whitlock, William


Lyons, Edward (Bradford West)
Roberts, Albert (Normanton)
Willey, Rt Hon Frederick


Mabon, Rt Hon Dr J. Dickson
Roberts, Allan (Bootle)
Williams, Sir Thomas (Warrington)


McCartney, Hugh
Roberts, Ernest (Hackney North)
Wilson, Rt Hon Sir Harold (Huyton)


McDonald, Dr Oonagh
Roberts, Gwilym (Cannock)
Winnick, David


McElhone, Frank
Robertson, George
Woodall, Alec


McGuire, Michael (Ince)
Robinson, Geoffrey (Coventry NW)
Woolmer, Kenneth


McKay, Allen (Penistone)
Rodgers, Rt Hon William
Wrigglesworth, Ian


McKelvey, William
Rooker, J. W.
Wright, Sheila


MacKenzie, Rt Hon Gregor
Ross, Ernest (Dundee West)
Young, David (Bolton East)


Maclennan, Robert
Rowlands, Ted



McMahon, Andrew
Ryman, John
TELLERS FOR THE NOES


McMillan, Tom (Glasgow, Central)
Sandelson, Neville
Mr, Joseph Dean and


McNally, Thomas
Sever, John
Mr. Jim Marshall.


McWilliam, John
Sheerman, Barry

Question accordingly agreed to.

Clause 5 ordered to stand part of the Bill.

Clauses 6 and 7 ordered to stand part of the Bill.

Clause 8

ALTERATION OF PERSONAL RELIEFS

8.45 p.m.

Mr. James Dempsey: I beg to move amendment No. 30, in page 4, line 16, leave out ' and 14 ' and insert 14 and 18 '.

The Temporary Chairman: With this we may take amendment No. 31, in page 4, line 32, at end add:
' (4) In section 18 (relief for blind persons)—

(a) for any reference to £180 there shall be substituted a reference to £300; and
(b) for any reference to £360 there shall be substituted a reference to £600.'.

Mr. Dempsey: These amendments do not require detailed explanation; they merely attempt to restore the purchasing power of the income tax allowances given to registered blind persons that existed when these allowances were introduced in 1962. That is a long time ago. I do not know of any other financial assistance to a particular section of our community that has remained at a standstill since that time. Even the death grant. about which I have had much to say, was updated in 1967.
I move the amendment to probe the Minister's mind, to see whether the Government intend to improve the allowances. They no longer represent their value at the time of introduction. There are many reasons why registered blind persons should have fair allowances. For example, because of their unfortunate disability they soil their clothes more than anyone else when eating at work. They soil shoe leather marching through pools


of water during the course of their work. They spoil their clothes, and sometimes their trousers become sodden. Their clothes deteriorate much more rapidly as a result of lack of care due to their disability.
These have always been accepted reasons why special provisions should be made for these people. Indeed, it is well known that today, with the volume of traffic on the roads, blind persons require to be accompanied when crossing main thoroughfares. Can anyone imagine a blind person alone trying to get across Whitehall, Millbank or Trafalgar Square, or any of our busy roads in towns and cities? Blind persons must have someone with them. When travelling to and from their work, they find themselves in that situation. I have known of many cases in which, because of the infrequency of bus services, blind people require to hire taxis. Taxis are now a costly luxury. Nevertheless, it is the only way in which some of these folks can get to and from work.
They do not want to adopt the alternative of throwing in the sponge and living on social security—which would cost the Government very much more in cash than it would cost them if they gave blind people a modest increase on the rates fixed for the allowance in 1962. I am at a loss to understand why all Governments from that time to date have never considered the demands—indeed, the entitlement—of these unfortunately disabled persons. Perhaps it has been an oversight; nevertheless, nothing has been done.
We cannot beg the question by citing other disabled people. There are no disabled people in the same category as the blind, due simply to the fact that a blind person is either registered blind or is not so registered. One cannot say that such a person has a percentage of blindness, because he is either 100 per cent. blind or nothing at all. He is not very difficult to locate. It does not pose a great administrative problem to assess this matter because there is a register of blind persons in the United Kingdom.
What other countries do for these individuals puts us to shame. Figures are available showing what Australia, New Zealand, Sweden, the Netherlands, Canada, and other countries are doing for fully blind persons, who are 100 per cent.
disabled but are working day after day and week after week for their livelihoods.
I should like to think that Britain would be as considerate and as generous as these other nations, which do so much for these unfortunately disabled people. That is why I felt that these amendments would be worth placing before the Committee, so that we could have an indication of the Goverenment's intentions in this matter. One cannot simply leave this allowance, fixed in 1962, to stand at its present rate for an indefinite period. We are entitled to some idea of the Government's thinking on this problem.
I certainly would have believed that in this Budget, when the reduction in the wealthy taxpayer's rate of tax from 83p in the pound to 60p will mean the loss of over £600 million—if we were able to make that particular sacrifice—we could do something, although strictly limited, for these individuals who are determined to live independently of any State funds.
The most recent figures show between 11,000 and 12,000 registered blind people at work in this country. To update their allowance, fixed in 1962, would cost less than the crumbs that fall from the relief given in this Budget to wealthy taxpayers. I am not making a political point; I am making a financial point. I am arguing fiscally. The amount received by blind people if the allowances were updated would be peanuts compared to the amount received by other sections of society.
The sum involved is so modest that I am deeply surprised that we have to frame amendments to raise the matter on the Floor of the House of Commons, that we have to publicise it, and have to mention that there exists a category of disabled people completely segregated from all other disabled. I have the greatest sympathy for all disabled, but one can get about with a stick; one can even get about in a chair or with a three-wheeled tricycle if one has one's sight. One cannot get about if one is among the registered blind.
The sum of money involved would not shake the foundations of the British economy. It would not rock the exchange rate of the pound or bring about a spiralling inflation and mass unemployment. The amount is peanuts compared to the gross national product and the tax handouts given in the Budget. I hope that


the Minister will give some indication of the extent to which he sympathises with these unfortunate people and that, as a demonstration of practical sympathy, he will consider increasing substantially the allowances fixed for registered blind people.
If the Minister cannot give any indication tonight, will he say whether he can give any encouragement on Report? This is a grave problem for handicapped people, although it might not seem much to hon. Members sitting here. If they want to experience the plight of the registered blind, they should close their eyes and try to make their way through the streets of London. They would appreciate how courageous are these people who are working day by day. They would surely agree that some tangible help should be shown to them as soon as possible.

The Financial Secretary to the Treasury (Mr. Nigel Lawson): No one could fail to be moved by the speech of the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) in moving the amendment, not merely for the way he carried out that task but because of his personal affliction. We on the Government Benches are conscious of the problems of the blind.
The hon. Gentleman based a large part of his case on the claim that the allowance had remained at its present level since 1962. That is not the case. The allowance has been increased since 1962. The present level was set in 1975, so it has not stood still for nearly as long as the hon. Gentleman believes.
9 p.m.
Of course we must have practical sympathy for the blind, but, as the hon. Gentleman said, there are many other categories of disabled persons. Although I must advise the Committee to resist the amendment, it is not on the ground of cost—the hon. Gentleman is right about that; it is simply because it is very difficult in tax legislation to define other categories of disabled. The blind can be defined, if we go along the tax route. That means that we can help the blind more and more, but not those in the other categories who do not have a similar allowance. That does not sound like sensible discrimination.
Therefore, successive Governments have felt that, on the whole, it is better to help the disabled through the social security system, where this sharp distinction does not need to be made. However, the help which is given, whether through social security or through taxation, to the disabled in general and to the blind in particular, has to be and is reviewed all the time.
I cannot, in all candour, invite the Committee to support the amendment. I hope that in the light of what I have said the hon. Member will see fit to ask leave to withdraw it.

Mr. Dalyell: I have great regard for my hon. Friend the Member for Coat-bridge and Airdrie (Mr. Dempsey), who represents a neighbouring constituency, and I sympathise with the case that he has made. I understand also the Government's point of view, but if the Financial Secretary says that there has to be a constant review, at least we are entitled to know why the allowance has not been indexed since 1975. A great deal has changed in those four years. Has he in mind any mechanism for constantly updating the allowance?

Mr. Lawson: As I said, the question is not merely how frequently the allowance should be reviewed. Certainly we are not proposing any form of indexation of the blind allowance or any of the minor allowances. We have argued in opposition and in government, as appropriate, for the indexation of major parts of the taxation system—personal allowances and perhaps other areas—but the question arises whether a review of help for the disabled is best done in the context of the social security system or that of the tax system. The view of successive Governments—including the present Opposition when in government—has been that this is best dealt with through the social security system.

Mr. Dempsey: I have listened carefully to the Minister's explanation. I remind him that even the Radcliffe Commission on the taxation of profits and income, which reported in 1954, demonstrated that the blind person was entirely distinct from all other disabled people. The Minister's own Government ultimately accepted that guidance in 1962. I associate myself with my hon. Friend


the Member for West Lothian (Mr. Dalyell) and ask that something should be done to index the allowance.
However, having said that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. John Cartwright: I beg to move amendment No. 29, in page 4, line 24, at end insert—
' (c) after subsection (2) (wife's earned income relief) there shall be inserted: " (3) If the total income of the claimant includes any income earned by her as a working widow, the deduction to be allowed under this section shall be the same as in the case of a married woman ".'.
The amendment aims to tackle the main grievance of working widows—that they pay more income tax than married women working alongside them at the same job for the same pay. The official Treasury explanation is logical—the widow's pension is a long-term benefit, it is taxable income and must be added to the widow's earnings for tax purposes. That means that the widow has a higher income than her married women colleagues and should therefore pay more tax. The widow's reaction is equally logical. She says that her husband paid contributions on an insurance basis throughout his working life to provide her with assistance if she became widowed, and because of that she is now penalised by the tax system.
The working widow also tends to regard her pension as an inadequate replacement for the financial support that she used to receive from her husband. She says that her married women colleagues at least have the benefit of their husbands' earnings and the full married tax allowance. On top of that, they receive additional help from the married women's earned income allowance. It is not surprising that this makes working widows feel that they are less favourably treated by our tax system than their married colleagues, who are in a better financial position.
Any hon. Member who canvassed during the recent election must have been impressed by the sense of anger, frustration and resentment produced by that situation. The difficulty is that so few people can begin to understand this reaction unless they have experienced the problems. I shall quote from a typical letter that I have received, which makes

exactly that point. A lady stated in a letter:
 Unfortunately I have recently become a widow myself and now realise what a difficult situation one is in … I am a supervisor, so have a number of widows working for me, but I did not really understand the problems of taxes until I found myself in their position.
That is the nub of the problem which arises from the Treasury view that widows are single people and must be taxed as such. This attitude does not seem to be shared by the Department of Health and Social Security. Any widow who decided to act as a genuinely single lady in her personal relationships would soon run the risk of losing her pension.
The idea that widows are single people has never seemed to be particularly logical. A widow acquires a pattern of life and a series of financial obligations which are largely beyond her control. They were undertaken when she was part of a husband and wife team, and they do not disappear magically when the husband is no longer there.
This point was put to me graphically in a letter from an active member of the National Association of Widows. She said:
 it still takes the same amount of fuel to cook my two potatoes or warm the room I sit in as it did a few long months ago and the mortgage payments are the same, the rates, the water charges. The list is endless.
That is echoed in many letters which I and other hon. Members have received. Indeed, some widows say that their household expenses are often greater because many of the decorating, maintenance and other heavy jobs around the house have to be paid for on a professional basis, when previously they were undertaken by the husband.
Because of this problem, there is a pressure on widows to go out to work. From a personal view, it is probably better for a widow to take up an occupation than to stay at home and brood about the life that she has lost. From a national point of view it must be better for a widow to make a contribution to the economy than to stay at home and draw supplementary benefit. However, the impact of taxation makes many widows question whether it is worth taking a job.
One of my constituents, a widow in her late forties, went back to work to provide her family with a better standard


of life than it could expect on social security. She enjoys the work, the companionship and the sense of achievement which her job gives to her. Unfortunately, her widowed mother's allowance and child benefit absorb most of her tax allowance, leaving her with little to set against her earnings. Is it any wonder that she questions whether it is worth taking on all the additional worries and pressures involved in full-time work, when taxation hits her so hard?
I have no doubt that the Financial Secretary will argue that the increases in personal allowances in the Budget go some way towards tackling such a problem. I accept that they will give some help, but all the time that the working widow is taxed as a single person she will be relatively worse off than a working married woman.
That is why the amendment seeks to give the working widow an additional tax allowance equivalent to a wife's earned income allowance. This does not involve the exemption of a widow's pension for tax purposes. It cannot, therefore, attract the usual Treasury objection that it will lead to claims for similar exemptions of long-term benefits from other groups—even though the Government are proposing just that course for war widows.
It may be argued that giving a working widow an extra tax allowance of this sort, which together with the single person's allowance will amount to £2,330 a year, will place her in a better position than a married man whose wife does not work and whose allowance is only £1,815. This is supposed to be an incentive Budget, one that rewards those who are willing to go out to work. I would, therefore, have thought that this proposal would commend itself to Members on the Tory Benches. In any case, it has become obvious that there is no ideal solution to the grievances of the working widow, or one which is totally free of criticism. If there had been one, some Government would have introduced it long ago.
The full year cost of this proposal was estimated by the Minister of State, in a recent parliamentary answer, to be about £75 million for widows under the age of 65. That strikes me as a very modest

price to pay to end the burning sense of grievance and injustice that is clearly felt by a particularly deserving section of the population. This is a relief which contrasts very sharply with some of the others proposed in the Budget.
Coupled with a determination to keep tax thresholds well above the level of the basic widow's pension and to re-examine the stupidities of the overlapping benefits rule, this proposal would go a long way to establishing widowhood as an honourable status deserving of fair treatment. The amendment has been suggested by Cruse, the national organisation for widows and their children, and it is supported by the National Association of Widows. I commend it to the Committee and ask the Financial Secretary to give it sympathetic consideration.

Mr. Tony Durant: I support the hon. Member for Woolwich, East (Mr. Cartwright), who moved the amendment so eloquently and made a great deal of the argument in favour of it. Widows are an important group. I sometimes think that that fact is not understood by the Treasury and that although it is an important group it does not represent a very large number of people. I thought it would be of interest to the Committee to give some of the figures.
The number of widows in Great Britain in 1973, listed in the abstract of statistics for 1974, was over 3 million. Of that number, approximately 2½ million were aged 65 and over. There were 366,000 widows aged between 60 and 64. Those two groups are in receipt of retirement pensions, and since the percentage of the population aged over 65 has increased in the intervening years, these figures may now be slightly higher. However, they will give some idea of the scope.
Widows in receipt of widows' allowance, widows' pension, widowed mothers' allowances, widows' pension age related and industrial injury benefit number 609,000. This was the figure given in 1976 in a parliamentary answer. In addition to those in receipt of war widows' pensions-88,000—those widows over 65 already receive the larger personal tax allowance provided that their income does not exceed £3,000—that is the vast majority of them. War widows, whose allowances are greater than those of


widows, now have their pensions disregarded for income tax purposes. This is something proposed in the current Budget.
Widowed mothers, although losing their £130 single parent tax allowance, are now classified as married men for tax purposes. Rightly so, since their needs are so much greater, as the hon. Member for Woolwich, East reminded us. Therefore, of the estimate of 3 million widows, almost 80 per cent. have already been recognised as needing special provision. We are, therefore, discussing about 20 per cent. only of the total number of widows, and they are working widows. The first point that I want to make is that the age of working widows is steadily dropping. If we look at the statistics—men seem to be dying earlier—we see that there are many more younger widows around.
This is an important matter for the working widow. I have taken an interest in the question of widows' rights since coming to the House and there is no doubt, in my experience, that it is very important, psychologically, that a woman should be able to go out to work in order to re-establish her life. The tax system has created a disincentive to do that. If we look at the facts we find that it pays to stay at home if one is in a certain category of widowhood. This is a mistake.
I was a member of a number of delegations that went to see the previous Government, who favoured the blanket approach for benefits. That was their view and they were entitled to it. I urge the present Government to look at this more from the incentive angle, a point made by the hon. Member for Woolwich, East. There is a need to provide an incentive for the working widow to go out to work. It is disheartening to her to find a married woman working alongside her taking home more pay.
Whether a previous Government were wise to bring in the allowance which enabled a married woman to go out to work is a matter of history. I think that it was done during the war in order to encourage more women to go out to work. I am not sure whether that was a good thing at the time. We now find that another group wants the same treatment, and that is only right and just.
9.l5 p.m.
After the Budget, the National Association of Widows sent a letter to my right hon. and learned Friend the Chancellor, a paragraph of which states:
 I do not need to remind you of the long and so far fruitless campaign waged by the National Association of Widows for recognition of the special financial difficulties faced by widows. The inevitable and drastic drop in income is exacerbated by the present method of taxation, and results only in very real lack of incentive to work and become independent.
Every widow I have ever met has wanted to be independent of the State as soon as possible. Widows wish to reestablish their lives. Therefore, we want a reassurance from the Government that they have this matter very much in mind and that at another Budget they will take account of the difficulties of widows about which no action has beeen taken on this occasion. Many widows have told me that they are deeply disappointed about that.

Mr. Dalyell: It may be within your recollection in a previous incarnation and a previous Parliament, Mr. Godman Irvine, that I took up many hours of your time with my strident views on the Scotland Bill, as it then was. During the general election campaign in West Lothian there was infinitely more complaint about the treatment of widows than about the views of the Labour candidate on the future constitutional arrangements of the United Kingdom.
With one possible exception this subject is the greatest source of grievance that we, as candidates, met on the doorstep. We should therefore take very seriously the amendment of my hon. Friend the Member for Woolwich, East (Mr. Cartwright). As a credential for doing so, I asked a question on 21 June asking the Chancellor
 what examination he is making of the taxation treatment of working widows.
The reply from the Financial Secretary was:
 All widows who are liable to tax will benefit from the very substantial reductions in income tax which my right hon. Friend has proposed in his Budget; but we shall, of course, continue to keep the effects of the tax system on widows under careful review.
I then asked the obvious question
 What does ' under careful review' mean to the Financial Secretary?


The Financial Secretary was his usual forthcoming self. He said:
 It means under careful review."—[Official Report, 21 June 1979; Vol. 968, c. 1492.]
I admit—I will give the Financial Secretary the benefit of every doubt, because I am a generous man—that that question was put immediately before the start of Prime Minister's questions. It was no doubt tactful of him, and it was certainly tactful of me, not to extend our exchange on that occasion because it was already 3.15 p.m.
This amendment gives the Financial Secretary a golden opportunity to expand on precisely what he meant by " under careful review ". Under Governments of both parties that phrase, as my hon. Friend the Member for Wolverhampton, North-East (Mrs. Short) will know from her experience of Select Committee reports, can be a polite Civil Service and ministerial paraphrase for doing nothing very much in the immediate or foreseeable future. If that is so here it would be much better for the Government to come clean and say that they intend to do nothing.
However, some of us think that if, in a parliamentary answer, a Minister says that a matter is under careful review wd are at least entitled to find out whether the undertaking is genuine or flannel. I therefore ask the Financial Secretary to say which it is.
There is among many widows not only the worry that they do not have the huband's wage or salary coming in; as my hon. Friend the Member for Woolwich, East said, they feel, rightly or wrongly, that their costs are that much greater for all the services which were provided by the deceased husband.
This is a major source of grievance, and I look forward to hearing what " under careful review " means, because I agree with my hon. Friend in all that he said.

Mr. Vivian Bendall: I support the amendment, and in so doing I have in mind not just the financial consideration, which is very important for widows, but the moral aspect of the matter. A person who is left a widow or widower has to try to make a new life in society. This can be extremely difficult for someone who loses husband or wife, perhaps

early in life. Apart from the financial problems, making a new way in life is difficult enough, but many widows and widowers wish to do just that, and under the present tax system that desire is frustrated.
As one always should in considering the social problems of our time, one must consider the moral as well as the financial aspects, and for that reason I strongly support what has been said. I shall not repeat the arguments already presented so ably, but I ask the Treasury to look at the matter again, and certainly in time for next year's Budget. Not only during the last election campaign but over many years this has been a grievance raised on the doorstep. I have had it brought to me at my surgeries, and I am sure that many hon. Members have had the same experience. I repeat my plea to the Treasury to look at the matter again from the moral as well as the financial standpoint.

Mr. Cryer: First, I apologise to my hon. Friend the Member for Woolwich. East (Mr. Cartwright) for not being present when he so ably moved his amendment, as I am sure he did, but I knew about it and had discussed it with him. I am now joining in the debate because I entirely sympathise with his view. Perhaps I should add that some of my constituents have made representations based on a most lucid article which my hon. Friend wrote about the position of widows.
I put down amendment No. 35, which has not been selected, to give some sort of tax relief not only to widows but to widowers and single persons running a household. The amendment before us makes a step in the right direction for a particular group of people living by themselves who have the problem in common that, for example, they face the same heating costs as are faced by a married couple. One cannot cut the light in half in a room. One has to pay the full amount just as a married couple do. I am sure that my hon. Friend pointed these things out. It is a problem common to all persons living by themselves and running a household, and I earnestly hope that the Treasury will give the amendments sympathetic consideration.
Widows feel resentment at being, put on a basis different from that applying to married women. Of course, it makes a difference to the actual cash in their


hands, but, having been deprived of someone whom they had hoped would be a lifelong companion they feel aggrieved to find married women better off, and this seems to rub salt into the wound of deprivation. There is, therefore, a strong element of fairness and justice in the amendment.
I have received a wide range of representations from organisations such as the Bradford branch of the National Association of Widows. During the last election campaign this whole matter was a frequent feature, especially at factory meetings. In the canteen, for example, widows expressed very strongly their feeling that they were badly dealt with. Indeed, on the occasions when I had a meal in a canteen, it was virtually a condition of my having a meal that the women working in the kitchen who were widows gave it to me after I had given a sympathetic response to what they had to say.
I already had a strong view on the matter, and I was able to point out that the tax position would improve anyhow because of the Rooker-Wise amendment. I assured them also, clearly and positively, following my frequent meetings with the Bradford branch of the National Association of Widows and representations made at my advice surgeries, that I would put the case as strongly as I could in the House of Commons, and that is what I am doing.
It should be borne in mind that a woman living by herself has now to face increased maintenance costs if she is an owner-occupier, as many widows are likely to be. Such widows are less likely to be able to carry out repairs themselves because of a lack of training or because their husbands did all the jobs around the house. These widows will now have to pay 15 per cent. VAT on maintenance work due to the Government's action.
A widow is more likely to have to pay maintenance charges, including 15 per cent. VAT, than a married couple. That is because the man can reduce costs by turning his hand to various jobs. That may reflect a lack of equality in our society in education opportunities and in developing dexterity in manual tasks around the house, but it is true that by and large widows face a more onerous position than other single persons. That

is all the more so because of the Governments action on VAT.
I hope that the Treasury will try belatedly to recoup some of the ill feeling that has been caused by the swingeing increase in value added tax by giving sympathetic consideration to the amendment.

Mr. Rooker: It must be said that those who view our proceedings or read what we say in the Chamber are likely to be surprised and upset when they realise that in the first debate of this Parliament on the vexed issue of widows and widows' pensions, which raised enormous interest during the election, there are only about 30 hon. Members in the Chamber. I am not asking for hon. Members to enter the Chamber to make fiery speeches. On this issue I am not even asking Tory Members to vote against the Government—I think that that is too much to ask. However, more hon. Members must be got at by widows, so that attendance is improved when we debate widows' pensions, widows' allowances and the tax position of widows. The Finance Bill was a golden opportunity to have a large-scale debate.
Having participated in and attended previous debates, I understand the real problems of changing the tax status of widows. It is an issue that was raised with me during the election. The only comfort that I had to offer the widows in my constituency was that the indexation of personal allowances would help. I said that the indexation of the personal allowance for the heads of single-parent families would help in any event. However, at that time I was not contemplating a VAT rate of 15 per cent. That has to be taken into account.
I ask the Financial Secretary to give consideration to two matters. If he cannot give an answer now, he will be expected to answer this time next year. All our short-term benefits are nontaxable except the widows' allowance. That is the one short-term benefit that is of a fixed term—namely, 26 weeks. Therefore, it can be easily coralled by the Treasury into the tax system. If we continue the present system of exempting short-term benefits, we should give consideration to exempting the short-term benefit paid to widows.
It has been said that the nature of society is changing. The age at which people die is changing. I have spoken to many widows—not only in the election campaign—aged between 35 years and 40 years who never considered the problems of widows when they were married. They never realised that if they were widowed under the age of 40 years they would not receive a widows' pension.
That never crossed their minds. They are bitter about it.
9.30 p.m.
I do not advocate that we should pay a widow's pension to all widows. However, the Treasury is reviewing the situation. No doubt that review will be considered before the next Financial Bill. A change could be made. That is what positive action by the Treasury should mean. If the pros and cons of public expenditure are being weighed up, will the Government allow more public expenditure in this area and widen the age range for the top rate of widow's pension from 40 to 55? In other words, will the Government consider giving a pension to widows who receive no benefit under the present system?
The hon. Member for Reading, North (Mr. Durant) pointed out that we were discussing only 20 per cent. of widows. That is not strictly accurate when we consider the number of widows under the age of 40. We must not forget that sector of the population. I ask the Financial Secretary to the Treasury to give a commitment that those two points will be considered in the Treasury review.

Dr. Alan Glyn (Windsor and Maidenhead): For once I agree with the hon. Member for Birmingham, Perry Barr (Mr. Rooker). At least the amendment brought to the attention of the Committee and the public the fact that widows are, of necessity, placed at a great disadvantage.
The first point of significance is the age of the widow. Many widows feel strongly about the absolute barrier of age. The second point is the fact that short-term benefit is taxable. I do not ask the Minister to bend his view in any way. I shall support him in the Lobby. However, the vital part of this debate is that it has drawn the attention of the House to the difficulties of the widow, whom I regard as the only valid one-parent family.
She has been married and has had a child. It is not her fault that her husband died. We should treat such one-parent families a little more compassionately than others.

Mr. Dalyell: Did I hear the hon. Gentleman aright? Did he say that the widow was the only genuine one-parent family?

Dr. Glyn: I said that hers was the only family where the lady had been legally married, produced a child and become a widow. A lady cannot become a widow if she never married. I think that the hon. Gentleman missed that point.
Having raised the Committee to this level, I hope my hon. Friend will consider those points.

Mr. Frank Field: May I sound a note of dissent? I shall be brief, as I wish to move an amendment later.
I, like other hon. Members, was questioned by a large number of widows in the election campaign. I put before the Committee the views that I put to them. I said that I was against amendments that exempted from tax widows' incomes or pensions, on the old-fashioned principle that all income should be taxable. I am against the endless erosion of the tax base. At present only 45 per cent. of personal income is taxed. As a result, the nominal marginal rates are high.
Hon. Members on both sides of the Committee put forward powerful arguments showing why widows should be treated differently. If those arguments are valid—as I am sure they are; I support them—the way to bring justice to widows is to look at the way in which we exempt their income from tax, mainly through the allowances ystem, rather than use the crude method of merely exempting their pensions from tax.
I find myself to some extent, therefore, at variance with my own side, in that I believe that the other short-term benefits, such as unemployment pay and sickness pay, should be brought within the tax net, but that it is important that the tax threshold should be raised to a point at which it is above the State poverty line One is really putting forward the old principle of taxation—that all income should be taxed. If that is done, it is possible to make major differences to


the marginal rate at which tax has to be levied. Although I am in 100 per cent. sympathy with widows in saying that they deserve better treatment, I believe that the amendment is profoundly mistaken.

Mr. Lawson: We have probably all had representations in our constituencies from widows who felt themselves to be very much ill treated by the tax system. The hon. Member for Birkenhead (Mr. Field), in his contribution a moment ago, put his finger on the real solution to the problem. That is not to go in for further erosions of the tax base, as he quite rightly put it. He was absolutely right in saying that, logically, unemployment benefit and sickness benefit should be brought within the tax net—although that is not, strictly speaking, the subject of the amendment—and that the right way to help widows was to introduce a substantial increase in the personal allowances.
The hon. Member for Keighley (Mr. Cryer) said that when he was tackled by widows in his constituency during the election campaign he pointed out that they would benefit from what he called Rooker-Wise. The increase in the allowances this year, as introduced by my right hon. and learned Friend the Chancellor of the Exchequer, is twice as much as that laid down by section 22 of the Finance Act 1977, commonly known as Rooker-Wise. This means that, even allowing for the November increase in the widow's pension—the biggest increase ever—by £3·80 to £23·30 a week—there is no widow living on the standard rate pension who will be for that reason liable to tax. That is the route that we have chosen for dealing with the problem of the widows in the Budget, and I commend it to the House.
I have to say to the hon. Member for Woolwich, East (Mr. Cartwright), who moved his amendment very eloquently, that, as drafted, it is technically defective. I know how annoying it is to be told that. During the years when I was in opposition, that is what Treasury Ministers were always telling me about my amendments. But I am assured that the amendment is technically defective, and that all it would do would be to replace the wife's earned income allowance by

the single allowance that widows get, and that since those two allowances are the same the widow would be no better off. I know that the hon. Member's intention was to give the widow two single person's allowances. That would make the widow considerably better off than the married man. However much we want to help widows, it is very much open to question whether it is right to make the widow better off than the married man in terms of these allowances.
The extra burden borne by the widow—who has already, of course, the burden of having lost her husband—is one that is also borne by the woman who suddenly finds herself divorced or separated and who also has to carry, single-handed, the burden of running the house, looking after the children, and so on. If we were to say that the widow should be benefitted in this way, there would immediately be a cast-iron case for benefiting the other categories of women in the same way.

Mr. Kilroy-Silk: I accept the importance of the Minister's point, but it does not necessarily remove the arguments that have been advanced in favour of widows. One could say that if it applies to the widows, and we accept their case, it should apply equally to the other categories mentioned. Does the Minister accept that the important point here is that widows, particularly those with children, are in a disadvantageous position in relation to single women who may be earning exactly the same amount of money, and paying exactly the same amount of tax, but who do not have the household expenses and the burden of bringing up a family that a widow has? I part company with my hon. Friend the Member for Birkenhead (Mr. Field) here, and suggest that widows, and others in a similar situation, should at least receive a tax-free household allowance.

Mr. Field: They would not be at a disadvantage if the child benefit allowance was adequate.

Mr. Lawson: There is a certain irony in what the hon. Member for Ormskirk (Mr. Kilroy-Silk) just said, though he conceded my point by saying that if this were granted it would not be sustainable to confine it to widows—the House would not accept that—and therefore, the true cost would be substantially more. The


hon. Member for Woolwich, East, in moving his amendment, rightly drew attention to the cost, which is something that we must all bear in mind. If this revenue is to be lost, there may be better uses to which that loss of revenue can be put. The hon. Member for Woolwich, East quoted a figure—it is the Revenue's best calculation—of £75 million, which is by no means chicken-feed. That would be the figure if this were confined solely to widows. If the scheme were extended along the lines that the hon. Member for Ormskirk said would be inevitable—I think he is probably right—the cost would be greatly in excess of that.
The widow, of course, when she is working alongside a married woman, often imagines that she is more highly taxed. She is not. The reason why she thinks she is more highly taxed is that she receives a widow's pension in addition to her wages. It is an irony if Opposition Members say that because a widow is given a more generous pension, which means that she pays more tax, she is therefore worse off. That really is the logic of the argument that has been put to the Committee tonight.

Mr. Kilroy-Silk: I go along with the hon. Gentleman on this and support him entirely. With that argument, how can he justify applying exactly the same considerations to war widows, because that is what he has proposed in the Finance Bill?

Mr. Lawson: We shall come to that on a separate clause, when I am sure it will be fully debated—particularly with the hon. Member for Ormskirk in the Chamber.

Mr. Field: That is an inconsistency.

Mr. Lawson: It may well be an inconsistency, but I shall come to that later this evening. The night is young. We have plenty of time. I am sure that the hon. Member for Birkenhead (Mr. Field) has no cause to feel impatient.
In advising my hon. Friends and the Committee not to accept this amendment—

Dr. Oonagh McDonald: As we have already considered extending these allowances to other categories, does

not the hon. Gentleman agree that such an allowance should also be given to a widower? A widower will have planned his household on the basis of two incomes and he may find additional expenses when he no longer has a wife to carry out various services.

Mr. Lawson: The hon. Member for Thurrock (Dr. McDonald) has made a most gallant and chivalrous gesture, if those terms can be used in reverse. The hon. Lady is, of course, absolutely right. If this extra allowance were to be given to widows there would be no equity in not extending it to widowers as well, so the consequent costs are that much greater.
In conclusion, in advising the Committee to reject this amendment—I hope that the hon. Member for Woolwich, East will not decide to press it to a Division, because I think that his intention was to have a debate on this subject, which is what we have had—let me answer the hon. Member for West Lothian (Mr. Dalyell) and the hon. Member for Birmingham, Perry Barr (Mr. Rooker), who asked me two questions. The hon. Member for West Lothian asked what the Treasury meant by a review. The Government have been in office for two months only. We produced a Budget that dealt with the key defects of the tax system as we saw them and made some major changes in income tax in particular. Of course, there were very many aspects of the tax system which there was simply insufficient time to go into.
The question of widows is one of many aspects that are under review. I give no indication that there is anything that we shall be able to achieve that will not be subject to unassailable objections in the light of that review. This is just one of many aspects of the tax system that are genuinely under review at the present time, which we could not deal with in the Finance Bill, which had to deal with the essence of the tax system.
The hon. Member for Perry Barr asked me two questions, and was kind enough to say that he would like me to reply to them this time next year. I shall certainly do so.

9.45 p.m.

Mr. Cartwright: I accept the Financial Secretary's advice about the technical deficiencies of the amendment, but that


is one of the problems of opposition, which he knows only too well. I must tell my hon. Friend the Member for Birkenhead (Mr. Field) that, whatever the amendment's technical deficiencies, we were certainly not arguing for an exemption of the widow's pension. We were trying to put the working widow in the same situation as the married woman by improving her allowances, which is a rather different approach to the problem.
So far as he made any positive contribution at all, the Financial Secretary seemed to suggest that the only solution on offer was to increase the personal allowances, but, as I said, that does not solve the relative position of the working widow to the working married woman, and it is that which causes all the grievance and frustration. The proposal that I put forward would certainly place the widow in a better position than the married man, but only a working widow in relation to a married man whose wife was not working. Since Conservative Members are in favour of encouraging people to work, I should have thought that that was something that they would have supported and that it would not have been an argument for opposing the amendment.
The Financial Secretary used the usual Treasury argument that if one gives a concession to this group all manner of other groups will be waiting in the wings to jump on the bandwagon. I may not carry all hon. Members with me, but I would argue that widows are in a different category from single people, or even divorced people. What has happened to them has happened through no fault of their own. They are suddenly landed in a situation where they have a great deal of personal problems and a great deal of financial burdens to carry. I think that they are deserving of special treatment as a result.
The one thing with which I agree with the Financial Secretary was when he said that the Government may not find an ideal solution. Indeed, I said that at the beginning. I do not think that we shall find an ideal solution to this problem. I do not believe that we shall find a solution which is unassailable and against which no criticism can be levied. At some stage in the game—I hope not before too long, whatever the difficulty—

I trust that there will be some action to deal with the problem of working widows.
This is a problem that will not go away. It will haunt both Front Benches. As my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) suggested, pressure will be applied to more and more hon. Members on both sides of the Committee. When we get to this stage in the Finance Bill next year, I hope very much that the Government will come forward with some positive proposals to deal with this problem. If they do not, I assure them that we shall once again return to the fray.

Amendment negatived.

Mr. Field: I beg to move amendment No. 32, in page 4, line 32, at end add—

" (4)(a) In section 22(2) of the Finance Act 1977 there shall be omitted the words ' Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as those reliefs are not less than the levels provided for in subsection (I) above.'
(b) In section 22 (3) of the Finance Act 1977 there shall be omitted the words ' Provided that the Treasury may by order, subject to approval before coming into effect by resolution of the House of Commons, prescribe a lesser relief in respect of any financial year, so long as that lesser relief is not less than £420 '."

This amendment stands also in the name of my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker). That I can move the amendment more briefly than other amendments that have been moved is not due to any lack of commitment on our part. It is because the argument can be put very simply indeed. Our aim is to pluck out the " Lawson " from the Rooker-Wise bosom, if I may put it in that way. We have a form of indexation on the statute book in that personal allowances should be increased in line with inflation, which is the Rooker-Wise amendment, unless the Government ask permission of the House to do otherwise, which is the Lawson amendment.
I hope that the din from the Conservative Benches will rise to one of considerable support for the amendment. I am drawing on three great Tory principles that should govern our political actions. The first is that we should learn the lessons of the past. The first lesson that I refer to is from the immediate past


—the Budget. The second is the principle that Governments cannot be trusted, and the third is that the law should be used sparingly and concern itself with only the key areas of public policy. I therefore wish to direct the debate to those areas where we wish the Government to keep to their commitments for the future, and to that end I wish briefly to look at the effects of the Budget.
We have had tax redistribution on an undreamt-of scale. I am not saying that the Government did not say that they would do that, but we did not dream that the redistribution would be on such a scale. One could go as far as to say that there has not been such a redistribution since the barbarians last overran Rome. Even the greedy must be embarrassed at the amount of relief that the Government are pushing their way.
The Treasury furnished me with a piece of information that illustrates my point. The poorest 10 per cent. of taxpayers received 2 per cent. of the tax cuts in the Budget. The richest 7 per cent. received 34 per cent. The amendment is tabled as a result of these lessons to influence the actions of the Government next year.
Next year the Government will have a full year in which to play with the value added tax revenue—if I may use the word " play ". We have heard consistently from the Government tonight about their commitment to reduce the standard rate of tax to 25p in the pound. That is worrying. Next year the Government will have to choose whether to reduce the standard rate or to honour the Rooker-Wise amendment and raise thresholds in line with prices. We move the amendment to tighten the Government's option and hope that it will not be such a clear option. We hope that with the revenue from a full year's VAT the Government will honour their commitment to raise the tax threshold. That is the essence of the amendment.
I wish to add an important rider, because what is said in debate is often quoted at a later stage. I am supporting indexation of personal allowances because we have to operate within the present tax system, but I doubt the wisdom of indexation. If one could guarantee where the revenue would be spent, there would be a good case for the tax

thresholds falling to almost nil. That was the essence of the then Government's proposals in bringing forward the tax credit scheme. It was the logical outcome of a tax credit scheme, or, even prior to that, of the Lady Rhys Williams scheme of social dividends. I move the amendment because we have to operate within the tax framework that is laid down, and not because I am fullheartedly committed to indexation. Given the options that the Government have next year, I should like them to choose that option in preference to reducing the standard rate.

Mr. Rooker: I rise to support my hon. Friend the Member for Birkenhead (Mr. Field), in the sense—I am leaving myself wide open again, as I did a few minutes ago—that we want a debate about what may or may not happen in next year's Budget. That gives the Financial Secretary the marvellous get-out of saying that he will tell us about next year's Budget next year. It is not the point that we wish to make tonight.
As I have said many times in this Chamber, like my hon. Friend the Member for Birkenhead, I am not a full-hearted indexer, as the Financial Secretary is. In 1977, Mrs. Wise and I were forced into putting forward our amendment because of the disastrous position into which the working poor had been placed because of the drag in the tax system. If the tax system can be recast, in ways very much like those suggested by my hon. Friend the Member for Birkenhead, with whom I agree, I for one would be happy to see the end of the provision in section 22 of the Finance Act 1977. However, I do not see a great recasting of the tax system under the present Government to benefit the working poor. That being so, I shall defend our amendment until the last vote on the Opposition side of the Chamber.
What worries us is that, on the Government's own admission, the inflation rate in November this year, measured by the retail price index, will be running at 17½ per cent above that of last November. If it is running at only 17 per cent. in December over last December's level, the cost next April of the indexation provision, the so-called Rooker-Wise amendment, will be £1·9 billion—assuming that the tax thresholds in this Bill are the base.
The figure of £1.9 billion is close to £2 billion, which is almost the extra amount that the Government will get from VAT in a full year. According to the Red Book, this year the unification of the VAT rate at 15 per cent. will bring in £2 billion and in a full year it will bring in £4·175 billion. The Government have said repeatedly that there is more scope for further tax cuts because of the extra money from VAT. The first thing that must be made clear is the cost of indexation.
I am glad to see the Secretary of State for Energy sitting on the Front Bench below the Gangway, because I am about to quote to the Committee something that he said in Standing Committee D on 14 June 1977, just before the Divisions on this question took place. He said:
 It is not right to talk about the cost of indexation, which was the phrase the Chief Secretary used. That betrays a misunderstanding, at least, of what we are proposing."—[Official Report, Standing Committee D, 14 June 1977; c. 497.]
He said " We ". Conservatives have some brass face. The amendments were tabled by Labour Members, but the right hon. Gentleman used the phrase " we are proposing ". He was making the point, and it is a point that I accept.
The present Chancellor changes his tune depending on which side of the Chamber he is sitting, in that the indexation cut is not a cut in taxes. It maintains the real value of the tax-free allowance, so that in real terms people are no better off. The other side of the coin is that if allowances are not maintained in real terms, people will be worse off. This is the gateway to the amendment successfully proposed by Mrs. Wise and myself, which bears our names. It is not a very well known term, so I shall not use it too often. It is only because Tory Members have kept using it that it has reached its present status.
However, amendment No. 32, which we are now discussing, was moved in June 1977 by the present Financial Secretary as a get-out for any future Tory Government. It was a cynical move, in the sense that the Conservatives knew that embarrassment would be caused to the then Labour Government in the Committee Room on that night in 1977, but they did not want to have to carry the can for where they were putting their votes then. They wanted to put their

votes there because they wanted credit the following day for embarrassing the Labour Government, but in the small print of that Finance Bill appeared the words that are before us on the Notice Paper tonight.
As any hon. Member can see, if the present Tory Government are so minded, having seen the rip-roaring inflation that they are creating, causing the necessity for finding a massive amount of money to pay for the indexation provision of just the personal allowances—not the higher rate thresholds that we debated earlier; as the Financial Secretary knows, we are talking only about personal allowances—as they see the inflation effect making the cost of that indexation provision close to £2 billion, or perhaps a bit above £2 billion, given the rate of inflation, they will look around for a way out.
There are several ways out. The Government can follow what is provided in section 22, if it is not removed from the 1977 Finance Act, and bring forward an order to the House to give a lesser amount. The cheapest of tricks, which might be expected from the present Tory Government, would be to calculate falsely the indexation provision as if this year's indexation provision had been maintained as in the 1977 Finance Act—that is, the ordinary indexation required due to inflation last year.
10 p.m.
The Financial Secretary has already said tonight that the Government doubled indexation and gave Rooker-Wise twice over. That may be laying the foundations for their saying next year that the indexation will be counted only as if the Government last year had indexed at the minimum level. That is a way of cutting several hundred million pounds off the expenditure that one would see in the Red Book. That is another way out.
We would like to hear from the Financial Secretary, if he so pleases, a commitment that when the Government consider the operation of section 22 next year—this is no pre-Budget secret—they will take as their base for any uplift in the indexation provisions the thresholds as contained in this Finance Bill, with the double amount of indexation. We would like that commitment on the record. It is not too much to ask. The Financial Secretary has not given a lot


in the debate on this Bill for us to use against him in the future. I believe that he could give us this small crumb. This is important to the millions of working poor. It is important to the 20 million people who mostly receive a tax cut only through a change in the allowances. They do not benefit from the Budget tax cuts granted by the Government to the well-off.
The second point is the thinking behind the operation of the order. I do not suppose that the Financial Secretary will advise his hon. Friends to accept the amendment. The Government would want to bring an order only if they did not want to index on the full basis of inflation. One can paint a horrific picture of inflation of 20 per cent. the other side of December-January, which would put the cost of indexation well over the figures that I have quoted. That should be enough to frighten even this Government. They are not so far frightened by the financial effects of their own Budget. If the Government decide to bring forward an order on the basis that they will not index according to that amendment, I remind them of three crucial words in that amendment—" retail price index ".
In the last few days a lot has been heard about possible moves by the Government to fiddle, jig and recast the retail price index—the cost of living index—chucking in all the tax reliefs and taking out the fuel costs. This is what we might get from the Government. That will nevertheless be their own index. They cannot call it the retail price index. The retail price index is the trigger for the indexation provision on the tax allowances. I would like that assurance tonight.
If the Treasury is so minded next year to contemplate bringing forward an order, will it guarantee that whatever else happens it will use the retail price index as it is today, and as it was in 1970, subject to any changes approved by the retail price index advisory committee? I suspect that even this Government will have a few problems getting some of the rumoured changes through that committee.

Mr. Barry Henderson: Is the hon. Gentleman saying that his

amendment in 1977 was good for the poorer section of society, that the present Government have done twice as well for that section of society, and that he does not like it?

Mr. Rooker: Basically, I am not debating this Finance Bill. [HON. MEMBERS: " Oh."] I have said that. Amendment No. 32 will give the House an opportunity to debate what might happen or to ask the Financial Secretary how the Treasury is thinking about the problem to be faced in next year's Finance Bill. That is legitimate. The amendment is in order. Tory Members express their doubts, but the amendment has been called for debate and so far I have not been called to order.
The whole point about the indexation section in the Finance Act is to enable us to think about the future. We looked to what was going on and thought that it should not be allowed to happen again. The indexation provision had no effect in 1977—or in 1978, because of the October Budget in 1977. This year is the first time that the automatic effect of section 22 of the 1977 Act has been an issue for debate in the House and something on which both parties have had to take a decision.
The whole point about indexation provisions is to cover ourselves for the future. The hon. Member for Fife, East (Mr. Henderson) is right. This Government may claim that they have done twice as well on indexation, but they have damaged the interests of the working poor through the other changes in the Budget and through the changes outside the Budget which we debated last week. If we were debating only changes in the tax system—of personal allowances—one could argue that they were of wholehearted benefit.
I have welcomed what the Government have done. They knew that they had to do better than my right hon. Friend the former Chancellor, because they were contemplating 15 per cent. VAT, which this party was not. But they have not done better in real terms. At the turn of the year, when inflation is close to 20 per cent., it will be seen that they have simply maintained the status quo in real terms.
I challenge anyone to deny that if it were not for the indexation provision in the 1977 Act fewer Members would have


been raising the issue in the first place in the last two years. I have every expectation that Governments, perhaps of both parties, would not have been so meticulously careful to claim that they were fulfilling the requirements of that part of the Finance Act, simply because the issue, which concerns the working poor, was put to the top of the political agenda two years ago.
We hear a lot from Tory Members—although not so much since 1977—about how it pays not to work in this country. The hon. Member for Aberdeen, South (Mr. Sproat) is conspicuous by his absence from this debate. The indexation clause clipped his wings and those of many of his hon. Friends, who sought to use the fact that because of a small margin of overlap between tax and social security a tiny percentage of people with large families and low earnings could be better off out of work. The Tories did not argue for changing the system. They used the system as a stick to beat the Welfare State and to undermine what the Labour Government were doing. Every manjack of them did that whenever possible.
Since 1977 the wings of those Tories have been clipped. The debate now centres on the meat of the issue—the question how we recast the tax and social security systems so that there is no poverty trap interaction under which some poor people, when they receive a £1 a week pay rise, lose £1·06 off their income. That is a marginal rate of tax of 106 per cent.

Mr. Ralph Howell: The hon. Member is trying to deceive the Committee into believing that the Rooker-Wise amendment would have helped the poorer paid. Indexation was doubled but it did little to help the tax threshold. The hon. Gentleman agreed with me earlier today that indexing personal allowances will not solve the problem.
The hon. Gentleman has carried on at great length about the Rooker-Wise amendment. It did nothing to relieve the poverty trap. The poverty trap is still large.

Mr. Rooker: Without that amendment the poverty trap would have been 10 times worse. Our amendment did not provide that indexation should be at the level of the retail price index. That was the minimum that we were prepared to

accept. We said that indexation should be raised not less than the percentage rise in the retail price index. We made our position clear.
We proposed new figures for personal allowances before the debate on indexation in Committee. The Tories would not vote for them. We wanted to raise the base of the personal allowance way above what was proposed by the Government so that the poor would be taken clear out of the poverty trap, and then to index the allowance.
I recall that one Conservative Member and John Pardoe—because he saw the light of day—voted with us. He saw the way things were swinging that night.
It is not true that we achieved the greatest thing since sliced bread. But we proposed the minimum to protect the working poor. It was a base on which to build. The Government have doubled the basic indexation and that is fine. I am trying to deal with the problem next year. That is why we have arranged the debate tonight.
Will the hon. Member for Norfolk, North (Mr. Howell) make a commitment that he will table amendments to next year's Finance Bill to raise personal allowances above indexation and be prepared to vote for them? If he says that he will I shall give way to him. If he is not prepared to put his vote where his mouth is he should stop moaning and saying that he is a champion of the poor. He should stop coming to the Chamber, obtaining information and, in the quietness of a poorly-attended Chamber doing what Conservatives always do—using that information as a stick to undermine the Welfare State and to make cheap political points based on a few spurious examples which have been publicised in the popular press. The Conservatives do not take serious action to obtain radical changes which will cure the poverty trap.
The poverty trap will remain unless we make the radical changes suggested by my hon. Friend the Member for Birkenhead such as a recasting of the tax system so that all income is brought within the tax net. I accept that point, but at the same time, the tax threshold should be lifted way above present levels. This Government could have made a considerable start, even this year, on tackling the issue of the poverty trap if they had carried out the commitment made by the


Labour Party during the general election campaign to raise child benefit. As ever, Tory Parties make promises during elections and do nothing once they achieve office.
We have not forgotten the promises on family allowances made in 1970 by the right hon. Member for Sidcup (Mr. Heath). The promises were not followed up when he was in government. Once again the working poor, the working families, of this country were cheated because Tories gave false promises at election time.
I apologise to the Financial Secretary to the Treasury for having been forced to descend to the level of the political argument engendered by hon. Members on the Tory Benches. All that I wanted to do was raise some of the problems that I see approaching the Government's doorstep at the turn of the year because of the level of inflation foisted on the country by the Government. There is also the gateway, built into this Finance Bill by the Financial Secretary, which enables the Government if they wish, to escape their obligations—with the help of Lobby fodder, such as the hon. Member for Norfolk, North—to raise allowances in line with inflation next year.

10.15 p.m.

Mr. J. Enoch Powell: Those who read the race card of the amendments to the Finance Bill in Committee soon get the knack of it. One looks at the names attached to a particular amendment. If the names do not include distinguished occupants of the Opposition Front Bench one knows that there will he a debate but that there is not likely to be a Division in which, at any rate, those in opposition need show any empressement to take part.
Those debates, however, such as this one initiated in an able speech by the hon. Member for Birkenhead (Mr. Field), do very often touch upon larger questions than the amendments which result in a head-on clash settled by a Division, and it seems to me that the brief debate which this amendment initiated revolves around one great truth and one great misunderstanding.
The great truth which we have learned over the years of inflation is that the pattern of taxation which the House seeks to set is constantly being disturbed by the interaction between an unforeseeable rate of inflation and the pattern of tax rates cumulatively set by a series of Finance Acts.
I should like to refer to a speech—I am sorry that the right hon. Gentleman happens not to be present—made earlier this afternoon by the Chief Secretary to the Treasury in dealing with an amendment which was designed to minimise the proposed reduction in the incidence of tax upon investment income. He suggested to the House that no less an issue than that of human freedom—which lay at the heart of Conservative philosophy—was involved in the level of tax on investment income. I am not sure that some similar fallacy might not be present in some of the arguments of the hon. Member for Birmingham, Perry Barr (Mr. Rooker). The trouble is that a principle so vague, or general, as that of individual freedom, once one invokes it in the context of taxation, is liable to lead far beyond the point which one wishes to attain.
If there is a principle of freedom involved in taxation, presumably it is a freedom not to be taxed at all. Once the right of society to tax is admitted,

then there is no particular point at which the principle of freedom calls a halt to the exercise of that admitted right of society. If it is alleged, as I thought was being argued by the Chief Secretary, that a graduated rate of taxation—that from him that hath shall more he taken—is an infringement of the self-evident principles of freedom, he should have been using it as an argument for the abolition of graduation or, at any rate, for an announcement that the Government intend to be done with graduation before this Parliament comes to an end. The principle cannot be invoked to justify a greater rather than a less degree of graduation, a matter of percentage points between greater or less graduation of taxation.
I stress this point because I fear that the concept of freedom, liberty, individual freedom will run away with the Conservative Party, and possibly with Her Majesty's Government themselves. There is no such thing as individual freedom apart from the society in which it is exercised. Freedom is a concept which is derivative from a particular society. Socrates, when he was asked " What is justice? " said " Let me construct a just society and then I will show you a just man." In the same way, those who are asked " What is liberty? " must beg leave to construct what they consider to be a free society and then say " We will now be able to show you free men."
The argument against greater or less regression, for a shift one way or the other in the pattern of taxation, is not to be resolved by the application of great principles. It is the expression of a trend or tendency a little more emphasised one way or the other as one year passes into the next. Those words bring me to the error which I believe lies at the heart of this amendment and its intention, namely, a breach of the principle of annuality.
Maybe the principle of annuality can be traced back to the Book of Genesis. Be that so or not, it is a principle which—I am sure that the Minister of State will bear me out—every incumbent of any office at the Treasury very quickly learns. Its relevant expression for our purpose this evening is perhaps that " there is no such thing as full year ". This might seem surprising, because the speeches of Chancellors of the Exchequer


are full of references to " full year yield " and " full year cost ". But there is no such thing as full year cost or full year yield. It never happens. We never have a full year on the basis of the previous year's decisions on taxation and spending.
The hon. Members for Birkenhead and Perry Barr made play of the concept of the yield of VAT next year as a result of what is being done in this Bill. The yield of VAT next year as a result of what is being done in this Bill will not be perceptible or ascertainable. It will be confused, covered up and combined with the results of all sorts of other causes which have come into play in the intervening 12 months.
The only reality in any Budget is the reality of the proposed but not always realised taxation and revenue for that year and the proposed but not always realised expenditure for that year. Next year is a different year, and all bets of the past year are off as one approaches the Budget of year 2.
Therefore, much though we might like to do it, we cannot impose requirements upon next year's pattern by projecting or extrapolating them from the pattern which was thought to be achieved in this year's Budget. I fear that we shall find ourselves much in the same place 12 months from now—debating in the light of the Budget of 1980 the precise balance of the pattern of taxation which will assuage or offend the wishes and prejudices of hon. Members on both sides of the Committee, and the supposed wishes and prejudices of those out of doors whom we purport to represent and sometimes perhaps partially succeed in representing.

Mr. Barry Porter: I think that what I am about to say will show that I am in agreement with the view expressed by the right hon. Member for Down, South (Mr. Powell) perhaps on a rather more esoteric level, but I shall at least try to make my speech much shorter than that of the hon. Member for Birmingham, Perry Barr (Mr. Rooker), which will not be difficult.
As I understand it, the purpose of the amendment is to restrict the power and right of the Government to assess the position regarding pensions or any other aspect of public expenditure on an

annual basis. I was not a member of the House which discussed and voted for the Rooker-Wise amendment. Indeed, if I had been here I should not have voted for it. [HON. MEMBERS: " Why not? "] My reason is simple, and I shall explain it to you, Sir Stephen, if you at least are interest—[Interruption.]

The Temporary Chairman (Sir Stephen McAdden): Order. I am trying to hear the hon. Gentleman's speech.

Mr. Porter: I am much obliged, Sir Stephen. I do not believe in indexation, for three good reasons. First, it is an acceptance of inflation. Secondly, it is an assumption of inflation. They may be reasonable assumptions and expectations at the moment, but I then come to my third and most cogent reason. I object to indexation because it is a direct encouragement of inflation.

Mr. Budgen: Does my hon. Friend agree that indexation is only an encouragement of inflation if we index the salaries or other emoluments of those who create inflation? We may therefore be encouraging inflation by indexation on Wednesday, but this particular Rooker-Lawson amendment does not necessarily encourage inflation, though it may reduce the popular will to defeat it.

Mr. Porter: I shall watch with interest to see how the hon. Member for Perry Barr votes on Wednesday. My much unread letter to the Daily Mail last week indicates where I intend to vote on Wednesday, and I shall vote against any suggestion of indexation of parliamentary salaries. In my view, anyone who is minded to vote in favour of it should examine his conscience carefully before doing so.
I said that I should be shorter than the hon. Member for Perry Barr was and I so intend. I shall be no supporter of any amendment which encourages the Government in any sense at any time to increase public expenditure through no desire of their own and no will of their own. It must be within the power of the Government each and every year to decide the content of their own Budget.

Mr. Peter Bottomley: My hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) has made an interesting point, but I


suggest that his speech was rather like one of the speeches from the Opposition Benches in that it left out half the package, because if we are moving into a stage where tax and benefit payments to and from the State, as my hon. Friend the Member for Kensington (Sir B. Rhys Williams) often puts it, are becoming more united, any suggestion that only one part of the package should be indexed is incomplete, and rather obviously incomplete.
I was hoping—perhaps I can still hope—that at some stage we could have a second edition of the book by the right hon. Member for Down, South (Mr. Powell), which might be called " Tax at 22½p in the Pound ", which would consider how the question of benefits tied in with the question of tax. If we can produce a benefit and tax package which has marginal loss of benefit or loss of income from the total package, not just taxation, we may reach the stage where the whole idea of the poverty trap comes out into the open and the incentive to work will be the same whether or not people have dependants, and the whole relationship of the individual or family with the State will become far clearer.
My belief is that what happens to the amendment tonight is not important. What is important is that we try to establish the understanding that the practice of changing rates of tax and benefit once a year should be treated on all fours, whether on the taxation side or as part of the social security side, and especially the child benefit part of it.
My view is that if we concentrate solely on the threshold or the rate of tax to the exclusion of similar attention or proper consideration for the level of child benefit which replaces the child tax allowances and the old family allowance, we shall get the whole business of tax and benefits more wrong than we need.

10.30 p.m.

Mr. Lawson: We have had a great number of debates on indexation in Finance Bills of recent years. I have taken part in a good many and I have a particular interest in this one because, as the hon. Member for Birkenhead (Mr. Field) and the right hon. Member for Down, South (Mr. Powell) very ably said, the purpose is to remove from the statute book the only words that I have

ever personally drafted and had placed on the statute book. However, if the 1977 Act is defectively drafted, the defect is not in the words for which I am personally responsible.
There are some important points here. I do not wish to go deeply into the question of indexation, but it is important that the different types of indexation are looked at on their merits. For example, my hon. Friend the Member for Woolwich, West (Mr. Bottomley) tried to make it appear that indexation of social security benefits was on all fours with the indexation of personal allowances. I have to tell him that that is not so. This is irrespective of the question whether benefits should be indexed, because—leaving aside the question whether there should be the words that some hon. Members wish to remove—indexation of benefits automatically sets the expenditure absolutely at that level.
Indexation of personal allowances does not set or fix the amount. It fixes only the structure, and the rates and yield can always be changed, year in and year out.
With other forms of indexation, such as indexation of salaries of hon. Members, new issues are brought in—issues of a totally different kind. I shall not go into that.

Mr. Peter Bottomley: Does that mean that when child benefits were substituted for tax allowances a mistake was made?

Mr. Lawson: No. I have not said that at all. I am just saying that many considerations are involved in this matter; that indexation of social security, child and other benefits, is of a totally different nature from indexation of tax allowances, and that it is important that that should be borne in mind. My hon. Friend the Member for Bebington—[HON. MEMBERS: " Look this way."] My hon. Friend the Member for Bebington and Ellesmere Port (Mr. Porter) sits on this side—

Hon. Members: Speak to the Chair.

The Temporary Chairman: It would be helpful if the Financial Secretary addressed himself to me.

Mr. Lawson: Yes. That is of very great concern to me since the time when I was your Whip, Sir Stephen.
My hon. Friend claimed that indexation was an invitation to inflation. Again, in this context we are talking of the indexation of the personal allowances. I am surprised that my hon. Friend should say that, because the Government's interest is in increasing the tax yield, particularly without obtaining parliamentary approval. That is a process which is ensured by an unindexed tax system. It is not ensured by an indexed tax system. Therefore, I think that my hon. Friend is mistaken in believing that somehow a Government have a vested interest in inflation if the tax system is indexed. The reverse is the case.
I now come to the specific point of the amendment. I am very glad that I and my colleagues on the Conservative side of the Committee considering the 1977 Finance Bill were able to get section 22 on the statute book. It was bitterly opposed by the then Government, particularly by the right hon. Member for Llanelli (Mr. Davies), who is now leading the Opposition team on this Bill. That is why he is so silent tonight.
I could not have approved the indexation clause as it now is—section 22—without the words that formed the burden of my amendment and that the Opposition seek to remove. Let us suppose that there were no such thing as inflation—a happy consummation. I am sure that no hon. Members would then suggest that it should be made impossible for any Government to change the personal allowances, or for that matter any other part of the tax system, in one direction—in this case to reduce them.
Hon. Members may argue that it would be wrong to do so, or that it would not be in the public interest, but they cannot argue that the Government should be prevented by law from ever changing the allowances—from ever reducing them. It is essential that the Government be given freedom to increase or reduce allowances. I see that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) is nodding assent.
In an inflationary age, what I have said means that while the starting point for the allowances is indexed to take account of inflation, so that it is constant in real terms, the Government must be able to come before the House each year with an order, if they see fit to do so, and say

" No. There should not be this indexation "—in other words, that the real value of the allowances should be reduced.
The important point, which we in the Committee on the 1977 Bill made time and time again, is that there must be truth in taxation.

Mr. Denzil Davies: Mr. Denzil Davies rose—

Mr. Lawson: I shall give way to the right hon. Gentleman in a moment. He should not be so impetuous.
We made clear that the Government must come to the House if they proposed that there should be a reduction in the real value of the personal allowances, and should not allow them to be eroded quietly, without any parliamentary approval, simply by the mechanism of inflation.

Mr. Denzil Davies: The hon. Gentleman is arguing that he added his own few phrases to the Rooker-Wise amendment so that the Government would have to come to the House in order to justify increasing or not increasing the personal allowances. But that happens every year. It has always happened, every year. Quite apart from the Rooker-Wise amendment, the Government must have the authority of the House on all the allowances every year. So what was the point of that amendment and of the hon. Gentleman's supporting it?

Mr. Lawson: The right hon. Gentleman is still trying to refight the battle that he lost in 1977. The Committee was not with him then, and this Committee is not with him now.
The fact is that at a time of inflation if there is no indexation provision of any kind, a reduction in the allowances is allowed to slide by without it ever being put to the House. That is why, under the previous Labour Government, in which the right hon. Gentleman was a Treasury Minister, the real value of the allowances fell and fell. It is under the present Government that the real value of the allowances has increased.
The hon. Member for Perry Barr seemed to accuse me of a Machiavellian plot. He did not seem to be sure what the plot was. He was not sure whether I had planned in 1977 to have provisions written into the statute book so that in, for example, 1980 the Government of which he assumed I knew I


should be a member could introduce an order taking advantage of the provisions and increase the allowances by less than the rate of inflation, or whether I was not taking the present value of the allowance, if the Bill is enacted as drafted, as the base. He accused me of harbouring both plots. Clearly, both cannot be true.
I thought that the hon. Gentleman was wrong to attack my hon. Friend the Member for Norfolk, North (Mr. Howell) and to suggest that his concern for the poor and those who find that it does not pay to work is not genuine. The hon. Member for Birkenhead will acknowledge that my hon. Friend's concern is genuine and that it has been consistent over the years.
We accept the statutory obligation under the 1977 Act. As I understand it, the base for indexation would be the 1979 value of the allowances. It would be intolerable if the principle of truth in taxation, which the right hon. Member for Llanelli says was present throughout the period of office of the previous Labour Government but was not, were not to apply. If it was there all the time, why did he fight such a persistent action to try to defeat amendments that provided for important innovations in the tax system? It would be wrong to try to convert and subvert that principle and to make it something that was never intended. It would be wrong, in the words of the hon. Member for Birkenhead, to remove one of the Government's options.
Some may think it right for a change in the tax system to apply to one section of taxpayers and not another. That is a reasonable argument. However, it cannot be said that the Government should not be free to shape the tax system as they think best. That is what the amendment seeks to do. If accepted, it would remove from the Government a necessary freedom. Therefore, I cannot advise the Committee to accept the amendment.

Mr. Field: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Dr. McDonald: The debate has ranged widely but it has directed our attention to the role of personal allowances and

the effect that they have on the burden of taxation on poor families.
Throughout the debate on the Bill the Government have insisted that it lowers the burden of taxation on ordinary families, that it provides an incentive for working families, and that it provides them with substantial tax cuts. To substantiate their views they presented figures alongside the Budget report that suggested that the Government's tax cuts provided a substantial tax reduction for ordinary families. The Government took credit for the changes in the Finance Act 1979 and linked those with the changes in the Bill to suggest that their generosity towards ordinary families was great indeed.
10.45 p.m.
When we separate those figures, as the Minister of State did in an answer to my parliamentary question on 21 June, we find that the situation is different. A family earning £35 a week gains not £2·39 but 68p from the Finance Bill. The same applies to a family on £40 a week. Its gain is only 68p. A family on £50 a week gains only 90p. A family on £60 a week begins to get something like a real gain, as a result of the tax cuts, of £1·20 a week.
In contrast, the April Finance Act gave substantial tax cuts to poorer families, and the increase in child benefit improved their income considerably. Under the April Finance Act and the increase in child benefit, a family on £35 a week received £1·71; a family on £40 a week the same; a family on £50 a week, £1·62; and a family on £60 a week received the same.
The generous treatment for ordinary working families comes not from the Finance Bill but from the April Finance Act. It is high time that the Government were honest enough to admit that. The Act of the previous Labour Government benefited many more ordinary families than this Budget.
Let me take that a stage further. The family on £200 a week gained 56p a week from the April Finance Act. The family on £200 a week, under this Finance Bill, gain £6·39 a week. When we look at the top and bottom of the scales we see who are the friends of the Government and where Government concern is directed. All their protestations of generosity to ordinary working families are


totally meaningless. Their aim is to help those who are better off.
The Government have strengthened their case by talking about average male earnings of £100 a week. It is true that such a family receives a reasonable benefit from the Finance Bill. However, we must set that against two facts. The average figure is, as usual, misleading. If we take the median figure, which is probably about £93 a week at the moment, we begin to see more clearly where the tax benefits lie. If we take into account the fact that there are now probably about 900,000 male wage earners on less than £60 a week and over 6½ million male wage earners on less than £90 a week, we can see clearly that the Finance Bill benefits the minority. It does not benefit the majority of ordinary families. There is no serious effort here to provide improved incentives for most workers. Incentives are provided only for the few.
To rectify that I tabled amendments that, unfortunately, were not selected for debate. They would have had the effect of substantially raising the married man's allowance and tax threshold to £2,095 a year. They would have allowed the first £40-odd a week tax-free for the married man and raised the single person's allowance to £1,345 a year.
If all the resources used in the Finance Bill to cut the standard rate of income tax, to raise the starting point for the higher rate bands and to lower the highest rate of income tax from 83 per cent. to 60 per cent. had been directed, at roughly the same cost, to raising the tax threshold as suggested in my amendments, perhaps we could have talked about real incentives for ordinary people. Then perhaps we could have taken seriously the Prime Minister's words in the debate on the Queen's Speech, when she talked about the serious consequences of taxation
 for those at the bottom of the income scale, where an extra pound earned can be lost in tax and by the withdrawal of means-tested benefits.
The right hon. Lady spoke movingly of the
 need to give an incentive all the way up the scale—to those on low incomes, those on differentials and those on management earnings. We shall hope to benefit all of those by a reduction in direct tax."—[Official Report, 15 May 1979; Vol. 967, c. 77–8.]

Everyone who heard the right hon. Lady in that speech commented on the passion and the conviction with which she spoke. It indeed confirmed, it was said, her claim to be a conviction politician. But, of course, when it came to working out the Finance Bill he convictions flew out of the window. The only proper test of strength of commitment is the action taken, and when we examine the Bill we find that those actions are simply not there. There is no attempt whatever to direct the resources that she intended to use in the Budget towards helping the poor and towards helping the worst off.
It is not a Budget which provides incentives for the low-paid. It is not a Budget which provides for many ordinary families the way out of the poverty trap. In fact, the overall effect of the Bill and its tax changes, and of the family income supplement increases which were announced on 21 June, will be simply to increase the numbers in the poverty trap.
There is, of course, through the reduction in the standard rate, a slight benefit to those families who find that they are both paying tax and receiving benefit, but the benefit is only slight. It brings down by 3p in the pound the marginal rate of taxation which some of them have to face, but 3p will hardly be of any use to those poor families as they face the coming inflation in the autumn and the winter. It means that very many families will find themselves caught even more firmly than before in the poverty trap.
The reason for this is quite simple. On the one hand, there is the Government's failure to raise the tax thresholds sufficiently. On the other hand, there is the Government's failure to raise child benefit and thus to provide very many poor families with a greater tax-free income.
It has been very difficult to get any information about how many families will be caught in the poverty trap following this year's Finance Bill and following the November uprating. One piece of information has emerged—that the Government now expect three-quarters of those in receipt of family income supplement, or those who are eligible for it, to be paying tax in this financial year. Last year the proportion of those eligible for family income supplement also paying taxation came to two-thirds, so there is plainly


some increase in the numbers to be caught in the poverty trap—and that following a speech in which the Prime Minister expressed her heartfelt concern for those families caught in this way and unable to struggle out of poverty.
I have found that, in the course of any attempt to pursue the matter further, parliamentary questions have not been answered, and there has been no reply to inquiries taken up with the DHSS. Section SR3A of the DHSS says that the figures are not available. Why are these figures not available? If the Government were much concerned about the poverty trap, surely these calculations would have been made as part of the preparation for the Budget. Failing to raise child benefit, failing to raise the tax threshold sufficiently, and concentrating all the resources on reducing the standard rate, and so on, would lead to an increase in the numbers caught in the poverty trap.
Surely the DHSS had those calculations available. Or was it that the Government just rushed headlong into their Budget and Finance Bill without carefully working these things out? Is there another reason, or is the real reason the fact that the Government are afraid to release the new figures of the numbers caught in the poverty trap? Is that why the Government are so hesitant and unwilling to answer any questions, and why any attempt to cross-examine the Department concerned provides no answer? I think that that is the real reason.
The Government have made their protestations. They have committed themselves to a concern for the poor, to an attempt to help each person help himself, and to help each individual family to find a way out of the poverty trap themselves. The Government have only made protestations. They have, in their tax concessions, carefully given all the goodies to the better off and have given nothing to the poor. That is why they are afraid to reveal that information, and why no information is provided. Perhaps that can be interpreted as a hopeful sign, and perhaps the Government are, after all, ashamed of their treatment of poverty stricken families. If they are so ashamed, it is high time that they rectified it in any further moves that they make.

Mr. Graham Page: It is a short point to which I want to draw

attention and it is directly concerned with the clause. It is an unexpected result of these new personal allowances that the age allowance is claimed in the form of an additional personal allowance, and in this clause what I would call the ordinary, single allowance is put at £1,165 and increased for the purpose of age allowance by £375. The ordinary married allowance is put at £1,815 and increased by £640 for the age allowance.
The married age allowance of £640 is reduced by £2 for every £3 excess income over £5,000. That appears in subsection (2)(d) of the clause. The result is that at the margin between £5,000 and £5,960—the point at which relief disappears for a married couple—the income is taxed at the rate of 50 per cent. That seems a very high rate in the context of the lower rates of tax which this clause and the previous clause set out to embody in the Finance Bill.
Would it not have been more reasonable, I ask my hon. Friend, to have made the additional relief reduction by £1, and not £2, in every £3 in excess of £5,000. The result would be that that excess income would be taxed at 40 per cent. only, which I think is far more reasonable when taken in the context of the lower rates contained in the Bill. I do not ask my hon. Friend the Financial Secretary to answer at once, but will he consider this before we reach the Report stage?

Mr. Lawson: I shall certainly consider the point made by my right hon. Friend the Member for Crosby (Mr. Page). He will be aware that this point has been raised in previous Committee stages of Finance Bills. The problem is that this high marginal rate relates to a particular point in the scale, as a result of the working of the age allowance system. Unless I recollect wrongly, I believe that there have been times in the past when the marginal rate was higher than 50 per cent. The consequence of the way in which the income limit for age allowance works is certainly something that I shall consider and about which I shall write to my right hon. Friend.
The hon. Member for Thurrock (Dr. McDonald) failed to give sufficient credit to two things. First, incentives are a matter of marginal rates of tax and these have been reduced almost all along the


line, certainly for the overwhelming majority of taxpayers.
Secondly, if the marginal rates of tax on those with high incomes have become absurdly high—which was a fact that was accepted by many Labour Members, including the former Chief Secretary, to whom the hon. Lady was PPS—that can be rectified only in a way that results in those people having reductions in their tax bills. If that is objectionable to the hon. Lady, there is no way ever of escaping from these absurd and damaging high marginal rates of tax. That is not something that we accept.
11 p.m.
Thirdly, the hon. Lady is concerned about the standard of living of the poorest members of the community. So are we all, but what will determine their standard of living is how well our economy performs this year and over the years ahead. There is no way of juggling with taxation that in the long run will make any difference to the welfare of the poorest members of the community, unless those changes in taxation are changes that will encourage incentive and an improvement in the economic performance of this country as a whole. That is what matters.

Dr. McDonald: May I say two things about that? First, the highest rate of tax is only a notional rate. It was extremely easy to avoid paying that high rate of tax by the kind of allowances that one was able to collect, and the hon. Gentleman will be well aware that there were many ways of doing that. Secondly, we are now in a position in which those on extremely low incomes face a higher marginal rate of tax than those on the highest incomes. Surely their position should be taken into account. It is not enough for the hon. Gentleman to say that such people will benefit from the growth in the economy as a whole. That is part of it, but when Government action, which is what is happening now, ensures that more of them will be caught in the poverty trap and will pay a higher marginal rate of tax than those on the highest incomes, that is a matter for the Government to decide on, in order to take the appropriate action. The hon.

Gentleman cannot avoid that by airily talking about the growth in the economy as a whole.

The Temporary Chairman: Order. I remind hon. Ladies and hon. Gentleman that interruptions prolong speeches, and that long interruptions prolong them interminably.

Mr. Lawson: The last thing that I would wish to do is to prolong my own speech. The hon. Lady must recognise that the poverty trap, as it is called, is something from which we wish to see people removed. That is why there is a substantial increase in personal allowances in this Budget and Finance Bill. Let the hon. Lady also reflect on this: if we wish to give really adequate help to the poor through the social security system, and if we wish to concentrate on those in greatest need, it is almost inevitable that there will be people on very low incomes who will be in some sort of poverty trap. It need not necessarily be as capricious as the one that we have at the present time, but to some extent that is a consequence of providing adequate help for the poor, without having a vast apparatus of State expenditure on benefits at all levels which would be economically disastrous and socially foolish.

Mr. Field: I want to put one simple point to the Financial Secretary. Was he not serving notice on the rich? Before giving way to my hon. Friend the Member for Thurrock (Dr. McDonald), he said that the strategy of the Budget was to give incentives to those on high incomes. That was the most effective way of increasing wealth and helping those who were poorest. Do the Government have a time scale in which they intend to look at the strategy of rewarding those with most in our society? If there is such a timetable beyond which they may withdraw the concessions, may we know?

Mr. Lawson: All I can say in conclusion is that the longer this Government are in office, the more effective the strategy will be.

Question put and agreed to.

Clause 8 ordered to stand part of the Bill.

Clause 9

EXEMPTION OF PENSIONS IN RESPECT OF DEATH DUE TO WAR SERVICE ETC.

Mr. Denzil Davies: I beg to move amendment No. 51, in page 4, line 41, leave out
' Service in the armed forces of the Crown or '.

The Temporary Chairman: With this we may take amendment No. 52, in page 5, line 3, leave out ' due to peace-time service '.

Mr. Davies: Both are probing amendments, merely to discover what is meant by the drafting of the Bill. Amendment No. 51 seeks to delete the words:
 service in the armed forces of the Crown ".
I have some difficulty understanding the subsection. The clause deals with what is referred to in a shorthand way as war widows. Why are those words there in contradistinction to war-time service in the merchant navy or war injuries? Subsection (2) deals with death in war or death as a result of injury in war. Will the widow of a Service man who is killed in peacetime on an Army base, possibly knocked down by Army transport, benefit under that legislation? If so, that highlights the difficulty of singling out one group of widows for benefits, which the Minister mentioned when referring to working widows.
Amendment No. 52 is narrower. It seeks to find out why the words
in respect of death due to peace-time service 
in relation to service before 1939 are found in paragraph (b). Why cannot paragraph (b) be covered by paragraph (a)? The words in paragraph (b) relate specifically to peacetime service, so why should they be different from paragraph (a), which merely relates to
 service in the armed forces of the Crown "?

Mr. Kilroy-Silk: I moved the amendment in 1976 that exempted 50 per cent. war widows' pensions from income tax, and I take the unusual step of congratulating the Government on bringing forward this clause, which takes that process much further. It exempts entirely the dwindling band of war widows from tax on their war widows' pensions.
I do not want to rehearse the arguments on the question whether war widows were a special case and fell into a special category, apart from other claimants, for tax exemption on their benefits. It was a controversial issue. Only 17 of my right hon. and hon. Friends went with me into the Lobby to secure the 50 per cent. exemption.
The case is not proven that war widows should be treated differently. It is a matter of emotion and personal commitment. We feel, however, that war widows are in a special category because of the service that their husbands gave to our country and the way in which they died, and should therefore be treated differently. One was not amenable to arguments of statistics or comparability with other groups. As the debate demonstrated at the time, it was a clear-cut case, one side or the other.
I am pleased that this dispute has now come to an end and that war widows, who have campaigned vigorously and vociferously, so far with limited success, to get their pensions entirely exempted from tax, find themselves in this position. I congratulate the Government and warmly welcome their commitment.

Mr. Graham Page: I had intended to make the same remarks as the hon. Member for Ormskirk (Mr. Kilroy-Silk) on clause stand part, but since the debate has been opened I would like to add my congratulations to the Government on recognising, in their first Finance Bill, the justice of the case that has been pleaded over many years for war widows to receive full exemption. The hon. Member for Ormskirk was lucky three years ago in seeing the 50 per cent. exemption accepted. I had put down an amendment to his amendment to increase the exemption to 100 per cent.
I have forgotten how long ago I started the campaign to free war widows' pension from taxation. We were almost the only country in the world that was not granting war pensions to widows free of tax, giving an equivalent benefit to them. This had been done for the widows of our previous enemies, who were receiving far more prestige and consideration than we were giving to war widows in this country. It is a matter for congratulation that the Government have now recognised this fact only too well. It had been recognized


that the war disabled were entitled to receive a pension free of tax, but, for some reason, until three years ago we taxed fully the war death pension.
Justice has not been brought entirely to the widows. Those of the First World War and the Second World War are receiving much lower pensions than are the Northern Ireland widows. There are only about 15,000 widows of the Kaiser's war and about 50,000 widows of Hitler's war still living. Those few are receiving much less than the widows of men who have died in the Northern Ireland conflict. Why this difference? Why cannot there be parity? Why is there still this unfairness towards the widows of the First and Second World Wars?
I welcome the 100 per cent. freedom from tax that is now granted to the war widows' pension, but it is not entirely sufficient. I join with the mover of the amendment in asking for clarity on two points set out in the amendment. There seems to be some ambiguity. I hope that the Financial Secretary will be able to clear our minds and assure us that there is no ambiguity and that the drafting of the clause has been carefully considered.

Mr. Lawson: I can give the assurance, both to the right hon. Member for Llanelli (Mr. Davies) and to my right hon. Friend the Member for Crosby (Mr. Page), that the drafting has been carefully considered. The purpose is to ensure that no distinction is drawn, as it would be drawn if the amendments, which I accept are probing amendments, were accepted. The intention of the drafting is to ensure that no distinction is drawn in respect of the tax treatment of war widows' pensions which would depend on the conditions of service or the theatre of war in which the death occurred.
It would be wrong to say, for example, that widows of men killed in either the Great War or the Second World War should get the tax exemption but that the widows of men killed in Cyprus, Aden, Northern Ireland or Malaya should not.

11.15 p.m.

Mr. Denzil Davies: Am I to understand that service in the Armed Forces of the Crown means war service—that there must be a war or armed conflict before the widow can claim?

Mr. Lawson: The point is that the widow has to be receiving a war widow's pension in the first place before there can be any question of her pension being exempt from tax. Therefore, if the death that made her a widow would not qualify her for a war widow's pension, clearly the clause would not apply.

Mr. Davies: Perhaps the Minister does not follow my question. May I give the example that I gave before? Let us suppose that a Service man was killed by a truck in one of the Army depots, at a time when no war was being fought near that depot or anywhere else. Would his widow be exempt from tax on that pension if, indeed, she was receiving a war widow's pension in respect of that death?

Mr. Lawson: This clause relates to war widows' pensions and to no other type of widows' pensions. If a widow got a war widow's pension because of a death in Northern Ireland, the clause would render that pension free from tax. It would be almost impossible administratively to find out from every war widow the circumstances in which her husband had been killed and thereby determine, as the amendment would have us determine, whether the tax exemption would apply.

Mr. Davies: I am sorry to press the Financial Secretary, but he is still not clear. Perhaps he does not want to tell the Committee, but is he really saying that the widow of a Service man who is killed while serving in the Army will receive a tax-free pension although her husband's death had nothing to do with war?

Mr. Lawson: This is a simple matter. If the circumstances are such, whether there is a war on or not, that the widow is entitled to a war widow's pension—

Mr. Davies: There does not need to be a war?

Mr. Lawson: No—she has to be entitled to a war widow's pension. In those circumstances, she would get exemption from tax.

Mr. Rooker: Is it not the case that the widow of a Service man killed on a base would not get a war widow's pension? She would get a pension, which would be taxable, but not a war widow's pension. Is that not so?

Mr. Lawson: That is absolutely right.

Mr. Rooker: Then why not say so?

Mr. Lawson: I have said it three or four or five times—that it is only in those circumstances, when there is a conflict of some kind and a war widow's pension arises in the first place, that there can be exemption from tax. If a soldier has a night out and falls off a bridge and is drowned and his widow is not entitled to a war widow's pension, there is no question of relief from tax. The position is simple. I am surprised that the right hon. Member for Llanelli wishes to detain the House longer on this matter.
I am grateful to the hon. Member for Ormskirk (Mr. Kilroy-Silk) and my right hon. Friend the Member for Crosby for their comments. This provision is the fulfilment of a pledge that we made in the election and which we have carried out in our first Budget. I pay tribute to the work that my right hon. Friend the Member for Crosby has done year after year to bring the plight of war widows to the attention of the House. He deserves the Committee's congratulations.

Mr. Denzil Davies: I asked the Minister a specific question why paragraph (b) in respect of death during peacetime service was so drafted in relation to service before 1939.

Mr. Lawson: There are certain deaths in conflicts in peacetime service. It would be wrong for the provision to be confined to war service, in the sense of the First or Second World Wars. There is a conflict in Northern Ireland. for example. The paragraph refers to
 any person or allowance at similar rates and subject to similar conditions which is payable by the Ministry of Defence in respect of death— ".
Those pensions will be paid by the Ministry only if the death occurs in conditions of conflict analogous to war. The drafting of the clause is based on the simple premise that where there is entitlement to a war widow's pension there will be exemption from tax. It does not change any entitlement.

Amendment negatived.

Question proposed, That the clause stand part of the Bill.

Mr. Graham Page: I should like answers to two matters relating to the drafting of the clause. Clause 9 (2)(c) reads:
 any pension or allowance which is payable under the law of a country other than the United Kingdom and is of a character substantially similar to a pension or allowance falling within paragraph (a) or (b) above.
If the foreign pension is taxed at source can the United Kingdom widow claim as an allowance that deduction if there is a double taxation treaty? I assume that she can.
Where tax has been deducted up to the present from the war pension, what is the machinery for the widow to get back her tax? I ask that because when there was 50 per cent. relief there was confusion. The machinery did not work well. I hope that it has been improved.

Mr. Lawson: My right hon. Friend the Member for Crosby (Mr. Page), with his well known perspicacity and attention to detail, asked two important questions. The answer to his first question is that, where the United Kingdom has a double taxation agreement with a country that taxes war widows' pensions, the pension of a war widow who is a national of that country but resident here will be subject to taxation at source. The country paying the pension has the right to tax it. Where there is no double taxation agreement, as in Guyana, India and Sri Lanka, the tax treatment of war widows' pensions paid to a widow resident here will depend on the domestic legislation in those countries.
Some war widows living in the United Kingdom may still have to pay tax—though not United Kingdom tax—on their foreign war widows' pensions. I hope that that satisfies my right hon. Friend on that point. On the question of the machinery, I hope that there will be no problems, but I will look into it and write to my right hon. Friend.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.

Clause 10 ordered to stand part of the Bill.

Clause 11

WITHDRAWAL OF CHILD TAX ALLOWANCES: CONSEQUENTIAL PROVISIONS

Question proposed. That the clause stand part of the Bill.

Mr. Stanley Orme: Before we pass the clause I want to raise the question of the withdrawal of child tax allowances and the consequential provisions, the issue of child benefits, and that of poverty, already raised by some of my hon. Friends this evening.
There is no doubt that in this Budget all sorts of tax concessions have been proposed, but the one question not dealt with is that of child support. If we had still had child tax allowances, as we have had over recent years, there would have been automatic relief for the family with children. As it is, child benefit has remained at the £4 to which the previous Government increased it, with the proposed increase of 50p that will come for one-parent families. It is within the knowledge of hon. Members that the previous Administration proposed to increase child benefit by 50p per child, to £4.50, in November. Arrangements had been made by the previous Government for this to be met out of the Contingency Reserve Fund. That would have ensured that the family, in a period of rapidly increasing inflation under this Government, would be taken care of.
The Tory Party paid lip service to child benefit and shed crocodile tears in the House when the Labour Government were phasing in those benefits. My right hon. Friend the then Secretary of State for Social Services came under constant attack because we were phasing in child benefits—not immediately implementing them—and so we feel justified in raising this issue.
The present Secretary of State for Social Services said, at the Conservative Party conference in 1977,
 Our tax system must be more family orientated. We must concentrate relief where there are dependent children. I give you this pledge: the next Conservative Government will retrieve the child benefit scheme from Mr. Healey's waste paper basket and give it top priority.
I make the point that it never went into the waste paper basket. It was fully implemented.
Where now is the commitment from the Conservative Government to child benefit to which Tory Members, including members of the present Cabinet, continually pressed the then Labour Government? There is the question of the amendment to a Labour Party Early-Day motion, which stated:
 The amendments are very significant since they spell out the Conseravtive Party's commitment to treat increases in Child Benefit in the same way as reductions in taxation. In this context the next Conservative Government, which is pledged to major reductions in direct taxation, would regard improvements in Child Benefits which are replacing Child Tax Allowances as part of this process.
Where are the reliefs in the Budget and in the Bill? That amendment was signed by two Cabinet Ministers and a junior Minister in the present Administration.
11.30 p.m.
The Government must tell the Committee why they have failed to take such action. If child benefit is not indexed and increased its value declines, and that means that families will be worse off. In November, faced with 17½ per cent. inflation, millions of families with children will be worse off.
The Government must tonight answer the charge that they have neglected the family by failing to uprate the child benefit in their tax proposals.
Earlier in the debate much was made of child poverty and the poverty trap. There was discussion about the tiny minority who might be better off on benefit than working. Child benefit did more to close that gap and help the families on low wages than any other benefit yet introduced. The Government's action, therefore, is a direct incentive not to work to those who are working and are struggling, with perhaps two or three small children, where the wife cannot work and where the husband is on a relatively low wage.
We cannot agree to the clause unless the Government give a satisfactory explanation, and in the absence of that explanation I shall ask my right hon. and hon. Friends to divide against the clause.

Mr. Field: Most of our discussion has been about the redistribution of resources from poor to rich. My right hon. Friend the Member for Salford, West (Mr. Orme) has been dealing with the other important redistribution in the budget—that is, from those with children to the childless.
Therefore, as the campaign on that issue must develop in the rest of this year, I shall draw attention to three important consequences of the Government's failure to live up to much of their loud talk before the election about the importance of increasing child benefit.
Because child benefits have not been increased in the Budget, which has cut taxation by £4 billion, the burden of taxation has been shifted back on to those —rich and poor—with children. Much of the division in the House has been along class lines, but this issue of child benefit ought not to divide hon. Members on that traditional basis. The division should be between those who support families with children and those who support the childless.
There has been much talk about the effect on those who may find themselves better off out of work than following their normal occupations. In the Budget the Government rightly increased all the dependency allowances for children where the parents could not work, but failed to increase allowances for the children of those in work. So the very horror that the Conservatives profess to foresee—of people choosing not to work—has been made more real by their own actions.
The Government have also failed to deal with the real problem of the working poor. The fastest growing group in poverty in this country are not those on benefits but those who do a full week's work but whose earnings are below the supplementary benefit poverty line—in other words, those who earn their poverty.
The only effective way of dealing immediately with that poverty is to increase child benefit. The message that some of us have failed to put across to enough hon. Members is that child benefit now has a twofold function. The only way to maintain equity of income between those with children and the childless is, when personal allowances are changed, to increase the tax-free income of those with children. The only way to do that is to increase child benefit.
Child benefit has the other important function of making a major attack on family poverty, particularly among those at work. Therefore, it is to be deplored, in the terms stated by my right hon. Friend, that in a Budget that has cut taxation by £4 billion not one penny has

gone specifically for children, whether those children be in families of rich or poor parents.

Mr. Lawson: You have been extremely generous, Sir Stephen, in allowing a debate on child benefit on a clause that has nothing whatever to do with child benefit—[Interruption.]

The Temporary Chairman: Order. I have listened to all those who have spoken, and now I should like to listen to the reply.

Mr. Lawson: —but is concerned with certain consequential provisions arising out of the ending of child tax allowances. The right hon. Member for Salford. West (Mr. Orme) was so carried away that he announced that if we were not careful he would advise his right hon. and hon. Friends to vote against the clause.
I do not know whether the right hon. Gentleman has taken the trouble to read the clause, but the substance of the matter is contained in schedule 1, and the clause merely relates to the schedule. One of the main purposes of the schedule is to ensure the exemption from tax of the dependency allowances for children received by widows and others in receipt of taxable social security benefits. I should be surprised if the right hon. Gentleman wished to vote against that.

Mr. Orme: We shall vote against the clause because that is the only way in which we can express our opposition. The lion. Gentleman can deal with this matter in other ways, but we have only one opportunity of expressing our views and we shall take it and vote this evining.

Mr. Lawson: If the right hon. Gentleman wishes to do that it is his right to do so, but he will be voting against the exemption from tax of the dependency allowances for children received by widows and others in receipt of taxable social security benefits. That is what he will be doing, because that is what the clause and the schedule are about. He will not be voting for anything to do with child benefit.
As for the right hon. Gentleman's points about child benefit, it is an impertinence, after the biggest tax-cutting Budget that there has ever been, with 75 per cent. of the tax cuts going to those on the basic rate of tax or below, for him


to ask, in effect, why we have not made more tax cuts. The families of married couples get a substantial increase in allowances.
It is a further impertinence for the right hon. Gentleman to ask why we are not increasing public expenditure, bearing in mind that he and his Administration left the incoming Government with an economy in which public expenditure was roaring out of control and the borrowing requirement was yawning wider and wider in a most inflationary way. No Government have had a harder task than we have to try to bring public

expenditure back into control. That is what we have to bear in mind when we are talking about public expenditure, and I think that a little humility is called for on the part of the right hon. Gentleman.

Mr. Rooker: Before the hon. Gentleman sits down—

The Temporary Chairman: Order. In my opinion the hon. Gentleman has sat down.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 277, Noes 233.

Division No. 48]
AYES
 [11.39 p.m.


Adley, Robert
Cranborne, Viscount
Holland, Philip (Carlton)


Aitken, Jonathan
Critchey, Julian
Hooson, Tom


Alexander, Richard
Crouch, David
Hordern, Peter


Amery, Rt Hon Julian
Dean, Paul (North Somerset)
Howe, Rt Hon Sir Geoffrey


Ancram, Michael
Dodsworth, Geoffrey
Howell, Rt Hon David (Guildford)


Arnold, Tom
Dorrell, Stephen
Howell, Ralph (North Norfolk)


Aspinwall, Jack
Douglas-Hamilton, Lord James
Hunt, David (Wirral)


Atkins, Robert (Preston North)
Dover, Denshore
Hunt, John (Ravensbourne)


Atkinson, David (B'mouth, East)
Dunn, Robert (Dartford)
Hurd, Hon Douglas


Baker, Kenneth (St. Marylebone)
Durant, Tony
Jessel, Toby


Baker, Nicholas (North Dorset)
Dykes, Hugh
Johnson Smith, Geoffrey


Beaumont-Dark, Anthony
Eden, Rt Hon Sir John
Jopling, Rt Hon Michael


Bell, Ronald
Edwards, Rt Hon N. (Pembroke)
Joseph, Rt Hon Sir Keith


Bendall, Vivian
Eggar, Timothy
Kaberry, Sir Donald


Benyon, Thomas (Abingdon)
Emery, Peter
Kimball, Marcus


Benyon, W. (Buckingham)
Eyre, Reginald
King, Rt Hon Tom


Best Keith
Fairbairn, Nicholas
Kitson, Sir Timothy


Bevan, David Gilroy
Fairgrieve, Russell
Knight, Mrs Jill


Biffen, Rt Hon John
Faith, Mrs Sheila
Knox, David


Biggs-Davison, John
Fell, Anthony
Lamont, Norman


Blackburn, John
Fenner, Mrs Peggy
Lang, Ian


Body, Richard
Finsberg, Geoffrey
Langford-Holt, Sir John


Bonsor, Sir Nicholas
Fletcher, Alexander (Edinburgh N)
Latham, Michael


Boscawen, Hon Robert
Fletcher-Cooke, Charles
Lawrence, Ivan


Bottomley, Peter (Woolwich West)
Fookes, Miss Janet
Lawson, Nigel


Bowden, Andrew
Forman, Nigel
Lee, John


Boyson, Dr Rhodes
Fowler, Rt Hon Norman
Le Marchant, Spencer


Braine Sir Bernard
Fox, Marcus
Lennox-Boyd, Hon Mark


Briaht Graham
Fraser, Rt Hon H. (Stafford &amp; St)
Lewis, Kenneth (Rutland)


Brinton, Tim
Fraser, Peter (South Angus)
Lloyd, Ian (Havant &amp; Waterloo)


Brittan, Leon
Fry, Peter
Lloyd, Peter (Fareham)


Brocklebank-Fowler, Christopher
Gardiner, George (Reigate)
Loveridge, John


Brooke, Hon Peter
Garel-Jones, Tristan
Lyell, Nicholas


Brotherton, Michael
Glyn, Or Alan
Macfarlane, Neil


Brown, Michael (Brigg &amp; Sc'thorpe)
Goodhart, Philip
MacGregor, John


Browne, John (Winchester)
Goodlad, Alastair
MacKay, John (Argyll)


Bruce-Gardyne, John
Gorst, John
Macmillan, Rt Hon M. (Farnham)


Buck, Antony
Gow, Ian
McNair-Wilson, Michael (Newbury)


Budgen, Nick
Gower, Sir Raymond
McNair-Wilson, Patrick (New Forest)


Bulmer, Esmond
Gray, Hamish
McQuarrie, Albert


Butcher, John
Grieve, Percy
Madel, David


Butler, Hon Adam
Griffiths, Eldon (Bury St Edmunds)
Major, John


Cadbury, Jocelyn
Griffiths, Peter (Portsmouth N)
Marland, Paul


Carlisle, John (Luton West)
Grist, Ian
Marlow, Tony


Carlisle, Kenneth (Lincoln)
Grylls, Michael
Marshall, Michael (Arundel)


Carlisle, Rt Hon Mark (Runcorn)
Gummer, John Selwyn
Marten, Neil (Banbury)


Chalker, Mrs. Lynda
Hamilton, Hon Archie (Eps'm&amp;Ew'll)
Mates, Michael


Channon, Paul
Hampson, Dr Keith
Maude, Rt Hon Angus


Chapman, Sydney
Hannam, John
Mawby, Ray


Churchill, W. S.
Haselhurst, Alan
Mawhinney, Dr Brian


Clark, Hon Alan (Plymouth, Sutton)
Hastings, Stephen
Maxwell-Hyslop, Robin


Clark, Dr William (Croydon South)
Havers, Rt Hon Sir Michael
Mayhew, Patrick


Clarke, Kenneth (Rushcliffe)
Hawkins, Paul
Mellor, David


Clegg, Walter
Hawksley, Warren
Meyer, Sir Anthony


Cockeram, Eric
Henderson, Barry
Miller, Hal (Bromsgrove &amp; Redditch)


Colvin, Michael
Heseltine, Rt Hon Michael
Mills, Iain (Meriden)


Cormack, Patrick
Higgins, Rt Hon Terence L.
Mills, Peter (West Devon)


Corrie, John
Hill, James
Miscampbell, Norman


Costain, A. P.
Hogg, Hon Douglas (Grantham)
Mitchell, David (Basingstoke)




Moate, Roger
Ridley, Hon Nicholas
Thompson, Donald


Monro, Hector
Ridsdale, Julian
Thorne, Neil (llford South)


Montgomery, Fergus
Rifkind, Malcolm
Thornton, Malcolm


Moore John
Roberts, Michael (Cardiff NW)
Townend, John (Bridlington)


Morris, Michael (Northampton, Sth)
Roberts, Wyn (Conway)
Townsend, Cyril D. (Sexleyheath)


Morrison, Hon Charles (Devizes)
Rost, Peter
Trippler, David


Morrison, Hon Peter (City of Chester)
Sainsbury, Hon Timothy
Trotter, Neville


Mudd, David
Scott, Nicholas
van Straubenzee, W. R.


Murphy, Christopher
Shaw, Giles (Pudsey)
Vaughan, Dr Gerard


Myles, David
Shaw, Michael (Scarborough)
Viggers, Peter


Neale, Gerrard
Shelton, William (Streatham)
Waddington, David


Neubert, Michael
Shepherd, Colin (Hereford)
Wakeham, John


Newton, Tony
Shepherd, Richard (Aldridge-Br'hills)
Waldegrave, Hon William


Nott, Rt Hon John
Shersby, Michael
Walker, Rt Hon Peter (Worcester)


Onslow, Cranley
Silvester, Fred
Wall, Patrick


Oppenheim, Rt Hon Mrs Sally
Skeet, T. H. H.
Waller, Gary


Page, Rt Hon R. Graham (Crosby)
Smith, Dudley (War, and Leam'ton)
Ward, John


Parris, Matthew
Speed, Keith
Watson, John


Patten, Christopher (Bath)
Speller, Tony
Wells, John (Maidstone)


Patten, John (Oxford)
Spence, John
Wells, Bowen (Hert'rd &amp; Stev'nage)


Pattie, Geoffrey
Spicer, Michael (S Worcestershire)
Wheeler, John


Pawsey, James
Sproat, Iain
Whitney, Raymond


Percival, Sir Ian
Squire, Robin
Wickenden, Keith


Pollock, Alexander
Stainton, Keith
Wiggin, Jerry


Porter, George
Stanbrook, Ivor
Wilkinson, John


Price, David (Eastleigh)
Stanley, John
Williams, Delwyn (Montgomery)


Prior, Rt Hon James
Steen, Anthony
Winterton, Nicholas


Proctor, K. Harvey
Stevens, Martin
Wolfson, Mark


Pym, Rt Hon Francis
Stewart, Ian (Hitchin)
Young, Sir George (Acton)


Raison, Timothy
Stewart, John (East Renfrewshire)
Younger, Rt Hon George


Rathbone, Tim
Stokes, John



Rees, Peter (Dover and Deal)
Stradling Thomas, J.
[...]ELLERS FOR THE AYES


Rees-Davies, W. R.
Taylor, Robert (Croydon NW)
Mr. Anthony Berry an


Renton, Tim
Tebbit, Norman
Mr. Carol Mather.


Rhodes James, Robert
Temple-Morris, Peter





NOES


Adams, Allen
Cunningham, Dr John (Whitehaven)
Hattersley, Rt Hon Roy


Allaun, Frank
Dalyell, Tarn
Healey, Rt Hon Denis


Alton, David
Davidson, Arthur
Heffer, Eric S.


Anderson, Donald
Davies, Rt Hon Denzil (Llaneill)
Hogg, Norman (E Dunbartonshire)


Archer, Rt Hon Peter
Davies, E. Hudson (Caerphilly)
Holland, Stuart (L'beth, Vauxhall)


Armstrong, Rt Hon Ernest
Davies, Ifor (Gower)
Home Robertson, John


Ashton, Joe
Davis, Clinton (Hackney Central)
Homewood, William


Atkinson. Norman (H'gey, Tott'ham)
Davis, Terry (B'rm'ham, Stechford)
Hooley, Frank


Bagier, Gordon A. T.
Deakins, Eric
Horam, John


Barnett, Guy (Greenwich)
Dean, Joseph (Leeds West)
Howells, Geraint


Barnett, Rt Hon Joel (Heywood)
Dempsey, James
Huckfield, Les


Beith, A. J.
Dewar, Donald
Hughes, Mark (Durham)


Benn, Rt Hon Anthony Wedgwood
Dixon, Donald
Hughes, Robert (Aberdeen North)


Bennett, Andrew (Stockport N)
Dobson, Frank
Hughes, Roy (Newport)


Bidwell, Sydney
Dormand, Jack
Janner, Hon Greville


Booth, Rt Hon Albert
Douglas, Dick
Johnson, James (Hull West)


Boothroyd, Miss Betty
Douglas-Mann, Bruce
Johnston, Russell (Inverness)


Bradley, Tom
Dubs, Alfred
Jones, Rt Hon Alec (Rhondda)


Bray, Dr Jeremy
Duffy, A. E. P.
Jones, Barry (East Flint)


Brown, Hugh D. (Provan)
Dunnett, Jack
Jones, Dan (Burnley)


Brown, Robert C. (Newcastle W)
Dunwoody, Mrs Gwyneth
Kaufman, Rt Hon Gerald


Brown, Ronald W. (Hackney S)
Eadie, Alex
Kerr, Russell


Brown, Ron (Edinburgh, Leith)
Eastham, Ken
Kilroy-Silk, Robert


Buchan, Norman
Ellis, Raymond (NE Derbyshire)
Kinnock, Neil


Callaghan, Rt Hon J. (Cardiff SE)
Ellis, Tom (Wrexham)
Lambie, David


Callaghan, Jim (Middleton &amp; P)
Ennals, Rt Hon David
Lamborn, Harry


Campbell, Ian
Evans, John (Newton)
Lamond, James


Campbell-Savours, Dale
Ewing, Harry
Leadbitter, Ted


Canavan, Dennis
Field, Frank
Leighton, Ronald


Cant, R. B.
Flannery, Martin
Lewis, Ron (Carlisle)


Carmichael, Neil
Fletcher, Ted (Darlington)
Lofthouse, Geoffrey


Carter-Jones, Lewis
Foot, Rt Hon Michael
Lyon, Alexander (York)


Cartwright, John
Forrester, John
Lyons, Edward (Bradford West)


Clark, David (South Shields)
Foster, Derek
McDonald, Dr Oonagh


Cocks, Rt Hon Michael (Bristol S)
Foulkes, George
McElhone, Frank


Cohen, Stanley
Fraser, John (Lambeth, Norwood)
McGuire, Michael (Ince)


Coleman, Donald
Freeson, Rt Hon Reginald
McKay, Allen (Penistone)


Concannon, Rt Hon J. D.
Garrett, John (Norwich S)
MacKenzie, Rt Hon Gregor


Conlan, Bernard
George, Bruce
Maclennan, Robert


Cook, Robin F.
Gilbert, Rt Hon Dr John
McMahon, Andrew


Cowans, Harry
Ginsburg, David
McMillan, Tom (Glasgow, Central)


Cox, Tom (Wandsworth, Tooting)
Golding, John
McNally, Thomas


Craigen, J. M. (Glasgow, Maryhill)
Graham, Ted
McWilliam, John


Crowther, J. S.
Grant, George (Morpeth)
Magee, Bryan


Cryer, Bob
Grant, John (Islington C)
Marshall, David (Gl'sgow.Shettles'n)


Cunliffe, Lawrence
Hamilton, James (Bothwell)
Marshall, Dr Edmund (Goole)


Cunningham, George (Islington S)
Harrison, Rt Hon Walter
Marshall, Jim (Leicester South)






Martin, Michael (Gl'gow, Springb'rn)
Rees, Rt Hon Merlyn (Leeds South)
Thomas, Jeffrey (Abertillery)


Mason, Rt Han Roy
Richardson, Miss Jo
Thomas, Mike (Newcastle East)


Maynard, Miss Joan
Roberts, Albert (Normanton)
Thomas, Dr Roger (Carmarthen)


Meacher, Michael
Roberts, Allan (Bootle)
Thorne, Stan (Preston South)


Mellish, Rt Hon Robert
Roberts, Ernest (Hackney North)
Tilley, John


Mikardo, Ian
Robertson, George
Torney, Tom


Millan, Rt Hon Bruce
Robinson, Geoffrey (Coventry NW)
Urwin, Rt Hon Tom


Miller, Dr M. S. (East Kilbride)
Rodgers, Rt Hon William
Varley, Rt Hon Eric G.


Mitchell, Austin (Grimsby)
Rooker, J. W.
Wainwright, Edwin (Dearne Valley)


Mitchell, R. C. (Soton, Itchen)
Ross, Stephen (Isle of Wight)
Wainwright, Richard (Colne Valley)


Morris, Rt Hon Alfred (Wythenshawe)
Rowlands, Ted
Walker, Rt Hon Harold (Doncaster)


Morris, Rt Hon Charles (Openshaw)
Ryman, John
Watkins, David


Morris, Rt Hon John (Aberavon)
Sandelson, Neville
Weetch, Ken


Morton, George
Sever, John
Welsh, Michael


Moyle, Rt Hon Roland
Sheerman, Barry
White, Frank R. (Bury &amp; Radcliffe)


Newens, Stanley
Sheldon, Rt Hon Robert (A'ton-u-L)
White, James (Glasgow, Pollok)


Oakes, Rt Hon Gordon
Short, Mrs Renée
Whitlock, William


Ogden Eric
Silkin, Rt Hon John (Deptford)
Willey, Rt Hon Frederick


O'Neill, Martin
Silkin, Rt Hon S. C. (Dulwich)
Williams, Rt Hon Alan (Swansea W)


Orme, Rt Hon Stanley
Silverman, Julius
Wilson, Rt Hon Sir Harold (Huyton)


Owen, Rt Hon Dr David
Skinner, Dennis
Wilson, William (Coventry SE)


Palmer, Arthur
Snape, Peter
Winnick, David


Park, George
Soley, Clive
Woodall, Alec


Parker, John
Sprlggs, Leslie
Woolmer, Kenneth


Parry, Robert
Steel, Rt Hon David
Wrigglesworth, Ian


Pendry, Tom
Stoddart, David
Wright, Sheila


Penhallgon, David
Stott, Roger
Young, David (Bolton East)


Powell, Raymond (Ogmore)
Strang, Gavin



Prescott, John
Straw, Jack
TELLERS FOR THE NOES


Price, Christopher (Lewisham West)
Summerskill, Hon Dr Shirley
Mr. James Tinn and


Race, Reg
Taylor, Mrs Ann (Bolton West)
Mr. Hugh McCartney.


Radice, Giles
Thomas, Dafydd (Merioneth)

Question accordingly agreed to.

Clause 11 ordered to stand part of the Bill.

Schedule 1 agreed to.

Clause 12 ordered to stand part of the Bill.

Schedule 2 agreed to.

Clause 13 ordered to stand part of the Bill.

Schedule 3

STOCK RELIEF

Mr. Richard Wainwright: I beg to move amendment No. 62, in schedule 3, page 19, line 20, at end insert—
' 4. For Paragraph 17 of the said Schedule there shall be substituted:

" 17(1) A claim for Schedule 10 relief may be made at any time before 1st January 1980 notwithstanding that the time limits imposed by paragraphs 1 (3) and 6 (3) of that Schedule have expired.
17(2) There shall be made such assessments, reductions of assessments or, on a claim in that behalf, repayments of tax as may in any case be required in order to give effect to the preceding provisions of this paragraph ".'.

The Temporary Chairman: With this we may take amendment No. 63, in page 19, line 20, at end add—
'(4) In paragraph 17 of Schedule 5 to the Finance Act 1976 for " 1977 " there shall be substituted " 1980 ".'.

Mr. Wainwright: The amendment is entirely innocent of any party politics or electioneering quality. The Committee should be aware that it concerns a great many small businesses that are not even incorporated, and trade as sole traders and not as companies.
The principle at stake, which I am sure commands the consent of all quarters in the Committee, is that fairness should not be sacrificed for administrative convenience. Allied to that is the practical consideration that if taxes are to be collected effectively it is important that no large body of taxpayers should be left with a genuine sense of grievance against the taxing statutes and the Inland Revenue. The Revenue is at the mercy of taxpayers nowadays. If they feel a strong sense of grievance they have ways and means of ensuring that taxes are not fully paid.
We are dealing with a manifestly improvised corporation tax relief that was enacted in the hectic inflation of 1974–75, so that the majority of businesses could continue to finance their stocks and work in progress. It was of such an improvised nature that it was generally believed in all quarters, certainly in the accountancy profession, to be of a temporary nature while something much better could be sorted out. It showed every sign of being temporary and improvised. However, nothing better has ever been produced. The relief, shoddy though it was


in construction, has acquired a degree of permanence in the Finance Bill. The first two years of relief are being written off. No attempt is to be made to claw back those two years of relief in any circumstances.
This is a key point. Only last year was there any indication from the Government that this highly improvised device would acquire a degree of permanence. By the time that the Government abandoned the temporary nature and appearance of the relief, the time limit for claiming it for the first two years had run out. Permanent relief will be given for all time to those who claimed. However, a considerable number of taxpayers, who had perfectly good and respectable reasons and acted on professional advice, found themselves left out of a permanent relief that they never expected to be permanent.
The relief was always highly temporary and improvised. It always depended upon the amount of stock or work in progress on one day of the year. I put the matter crudely but graphically. It could happen within a trade in imperishable objects with a relatively stable value, which are not too expensive to move about, that different businesses, with different year ends, pass large quantities of stock from one to the other, inflating their stock figures, for only one day in the year.
The extraordinary and shoddy nature of the relief gave the business community the impression, very understandably, that such a shoddy device must be temporary and could not possibly become a long-term, permanent feature of a taxation system of which we are rightly proud. As a practising accountant at the time I never believed that such a shoddy device—under which one day's transactions were sufficient for large sums of relief to be obtained—would become permanent. The shoddy nature of the relief was never remedied. The relief has become permanent in respect of the first two years.
We are now left with a substantial number of aggrieved business people—both companies and unincorporated traders—who, for perfectly good reasons, were advised not to claim the relief at the time. Often people who had low profits in those years paid corporation tax at a low rate and therefore failed to claim

at the time. As the relief looked as though it would be temporary they were scared that the tax would eventually be clawed back from them in the future at a much higher rate. Therefore practising accountants throughout the country advised their clients that they would be unwise to claim at that moment.
The character of the matter changed unexpectedly last year. Some people, understandably, feel that they have been left stranded. Other people's relief will become permanent, but they will be left out.
12 midnight
The usual Treasury Bench defence cannot be adduced in this case. Usually the Treasury Ministers tell us that we are dealing with a very finely wrought statute of expert craftsmanship and that it ill behoves amateur draftsmen to start messing about with it. That defence is not available to the Government in this case because, as I have said before, the whole of this relief was of a highly improvised nature and could never be claimed by the Treasury Bench to be a delicate, carefully worked out matter which must not be messed about.
As a statute it is a very unfortunate blot upon tax legislation in this country, but the House has voted that it should become permanent in respect of some years, and the amendment is designed to make sure that a substantial number of thoroughly honest and respectable trades-people are not left out through a very understandable failure to claim relief at the time.

Mr. Lawson: The hon. Member for Colne Valley (Mr. Wainwright) made several very fair points in moving the amendment. He said that the provision was intended originally as a temporary scheme but that it had lasted because nothing better had yet been introduced. I agree with that analysis, and I trust that before too long it will be possible to introduce something better. The hon. Member said that no party point was made. Whether that is a good or bad thing I am not sure, but it is certainly true. He also said that there were practising accountants throughout the country who had advised their clients not to take advantage of this relief. There may have been such—indeed, there were—but there were many more accountants who advised


many more clients that they should take advantage of this relief, and those were the accountants who gave the right advice.
The hon. Member suggested that the amendment would be rejected by the Government and by the Treasury on the grounds of administrative inconvenience. I admit that there would be considerable administrative inconvenience, but that is not the ground on which I base my rejection. The ground is that this is a very nicely balanced argument, and there is £150 million at stake. We have heard one side of the argument from the hon. Gentleman, who put his case very fairly and I shall give the other side in a moment. The Committee has to decide, in the light of this nicely balanced argument, whether it would be right to lose £150 million of revenue—a substantial sum. The accountancy bodies have also made the case as raised by the hon. Member.
The arguments against the amendment—there are many of them—boil down to this: the previous Chancellor of the Exchequer stated on several occasions, well before the time had run out for claiming the first two years' allowance under the stock relief scheme, for 1973–74 and 1974–75—that is what the amendment is about—that those could have been claimed right up to the end of 1976 and, in the case of income tax, up to 5 April 1977. He assured the House and the business community that there was no question of any withdrawal of past relief and that there would be no question of any clawback, and so on.
The hon. Member is seeking to tell the Committee that those business men who did not believe the previous Chancellor of the Exchequer should be recompensed for judgments that they made on the basis of disbelieving him. I have some grudging sympathy with that. It was extremely difficult to believe anything that the previous Chancellor of the Exchequer said. Nevertheless, I do not think that that is a firm basis for yielding £150 million of revenue. The administrative aspects, as the hon. Member for Colne Valley implicitly admitted, are horrific. The cost in extra administration in dealing with the 50,000 claims that there are likely to be, evaluating each and every one of them and making the adjustments that would

have to be made to get the right amount of rebate, would be very difficult But I do not rest my case on that alone.
It is not as simple as is made out by the amendment, because it would be impossible to confine the reopening of claims to the first two years. The third and fourth years of the scheme are now out of date for companies, and for unincorporated businesses, which many small businesses are. Indeed, for some companies it may be too late to claim for 1977–78. Therefore, if we were to yield on the first two years, in all fairness we would have to yield to the claims made in respect of later years which are not out of time, as it were. This would considerably complicate the matter and further add to the cost.
With some regret, because I acknowledge that there is a case to be made and that the hon. Gentleman made it very fairly, I ask the Committee to reject this amendment.

Mr. Richard Wainwright: I shall be very brief at this hour but I must say a word to counteract the Financial Secretary's glib judgment that, although most accountants gave the right advice, some gave the wrong advice. This is an unfair aspersion on the profession. As I tried to make clear in my previous remarks, many accountants were faced with clients who, during the years in question, had had such low profits that even if they had failed to take the relief they would be paying only a modest rate of corporation tax, or perhaps none at all.
Having regard to the fact that at that time opinion generally was that such a gimcrack relief could not possibly be allowed to last, the accountants said " If you claim this relief now it may be clawed back in a year or two at a much higher rate of tax ", which I think was a reasonable assumption having regard to the nature of the previous Administration. I think that it is important to note that I am not coming to the defence of unwise accountants or people who gave bad advice.
I regret that the Financial Secretary has taken this rigid position. I think that the Inland Revenue will have cause to regret the lasting sense of unfairness that will remain with many business men, some of whom badly need the working capital that this relief would have given


them at a time when inflation is rapidly increasing.
It is clear that the Financial Secretary has the big battalions on his side, and at this time of night I do not propose to take any steps to divide the Committee.

Amendment negatived.

Schedule 3 agreed to.

Clause 14

CAPITAL ALLOWANCES: MOTOR VEHICLES

Mr. R. B. Cant: ; I beg to move amendment No. 55, in page 6, line 11, leave out subsection (2) below ' and insert
'subsections (2) and (3A) below '.

The Temporary Chairman (Mr. Michael English): With this amendment it will be convenient to take Government amendments Nos. 57, 58 and 59, as well as amendment No. 56, in page 6, line 27, at end insert—
' (3A) Where any vehicle is the subject of a hiring agreement on terms falling within the provisions of subsection (2) above and that hiring is a further hiring of a vehicle already the subject of a hiring agreement, subsection (2) above shall apply to the first hiring agreement as if the terms of that agreement were within the provision of subsection (2) above, and the first year allowances which shall be made by virtue of subsection (2) above shall he made accordingly '.

Mr. Cant: I listened to the right hon. Member for Down, South (Mr. Powell) with some interest. In a sense he almost held out a ray of hope, because he said that the list of amendments nowadays is very much like a racing card, and that an hon. Member whose amendment did not have the names of members of the Government associated with it could abandon all hope.
I notice that my amendments were linked with a number of Government amendments. Even though I do not fully understand my own amendments, I have drawn the conclusion that there is no particular relationship between what I am proposing and what the Government are proposing.
Had the Opposition carried on as the Government of the day, this whole question of leasing might have led to some quite exciting discussions in the Finance

Bill Committee. There is no doubt at all that this has become one of the growth points among our financial institutions. Figures of £2,000 billion or £3,000 billion are the amounts that are talked about. It has become respectable only because some very reputable names, such as the commercial banks and such household institutions as Tesco and Mothercare—searching hectically for tax shelter—are associated.
Had they continued as the Government of this country, anything that the Opposition would have done to close loopholes, and so on, is all water under the bridge. I rise only to put a point that has been made to me by people interested in this area. Although they do not object to the clause as a whole, it would appear that there is something of an anomaly implicit in it, in the sense that where cars are bought for leasing—that is, long-term—the capital allowance is reduced to 25 per cent. per annum, but where cars are bought for short-term hire, the first-year allowance remains at 100 per cent.
A short-term car hire business must finance its fleet of cars in some way. In fact, many such businesses finance their fleet by leasing. As the clause now stands, such businesses will be at a competitive disadvantage against those firms that choose another method of finance, such as purchase financed by loan, for they will lose the 100 per cent. first-year allowances, whereas their competitors will not.
In all cases where the actual use of the car is short-term hire, there should be 100 per cent. first-year allowances, even in those cases where the car hire firm does not own its own cars but leases them. To put it more popularly, it would seem that it is legitimate to look through the long-term lease and see the short-term hire. If these amendments were made, car-hire firms would be able to compete on equal terms, regardless of the method of finance.
That is the main burden of the argument behind these two amendments. I hope that I have convinced the Minister. I have listened to earlier debates on perhaps rather more important and emotional social problems. I have not noticed the Minister yield, but in this rather more esoteric atmosphere of finance,


about which he is much more knowledgeable as well as happier in discussing, perhaps he will respond favourably on this occasion at this late hour.

12.15 a.m.

Mr. Geoffrey Dodsworth: I was at one time chairman of the organisation that has helped draft some of the amendments, and I believe that the Government amendments might well meet the points raised by the hon. Member for Stoke-on-Trent, Central (Mr. Cant).
The object of the exercise is to maintain a balance between the provision of equipment based on loan or lease. That has been the historical perspective of repeated parts of past Finance Bills. The clause seeks to redress an imbalance and ensure that we look through the long-term lease to the short-term letting as the basis for the allowance.
As framed, the clause has the effect of changing the provisions of paragraph 12 of schedule 8 to the 1971 Finance Act. That deals with the treatment of rentals paid and provides for a disallowance of some of those rentals. The amendment to that schedule has an effect that was not intended when it was drafted. It cuts off a section of the short letting activity. It is a point for the Financial Secretary to consider in future correspondence and not for this debate, and it has only recently come to my attention.

Mr. Lawson: My hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) is a former chairman of the Equipment Leasing Association. The matter that he raised has only now come to my attention, and if he cares to write to me I shall look into it.
It is a pity that the hon. Member for Stoke-on-Trent, Central (Mr. Cant) is surrounded on his side of the House by empty Benches, because for the first time in these debates an Opposition amendment has raised a good point. He is on to a winner. The clause is designed to correct a flaw in the capital allowance provisions which enabled expenditure on cars bought on long-term leasing to qualify for 100 per cent. first-year allowances instead of the 25 per cent. allowances

normally available for expenditure on business cars. That was clearly a loophole that we have closed with our amendments, and I am glad that my hon. Friend the Member for Hertfordshire, South-West agreed that it should be closed.
It was not intended that it should at the same time mean that expenditure on cars bought by a leasing company and leased to a taxi or short-term car hire business should no longer qualify for the 100 per cent. first-year allowances in the same way as expenditure on cars that are bought by a car hire business. My right hon. and learned Friend the Chancellor of the Exchequer has tabled amendments Nos. 57, 58 and 59 to meet that point. If I may say so, they do it slightly better than do the amendments drafted by the hon. Member for Stoke-on-Trent, Central. I congratulate him on his great acuity in spotting the flaw in the Bill, but perhaps he would care to withdraw amendments Nos. 55 and 56 and assist in the passage of the Government amendments.

Mr. Cant: I am rather taken aback by the Minister's reply but find it very acceptable, even though the hour is late, the press have gone to bed and my colleagues have departed. I shall be happy to withdraw my amendment. I am glad to hear that the Government amendments will meet the case. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 57 in page 6, line 14, after ' (a) ', insert
the following conditions are satisfied—(i).

No. 58, in page 6, line 17, leave out ' (b) ' and insert ' (ii) '

No. 59, in page 6, line 20, at end insert
' or
(b) it is provided for hire to a person who will himself use it wholly or mainly for hire to, or the carriage of members of the public in the ordinary course of a trade and in a manner complying with the conditions specified in paragraph (a) above '.—[Mr. Lawson.]

Clause 14, as amended, ordered to stand part of the Bill.

Clause 15 ordered to stand part of the Bill.

Clause 16

UNITED STATES DOUBLE TAXATION CONVENTION

Question proposed, That the clause stand part of the Bill.

Mr. Denzil Davies: I shall not detain the Committee for long. It is a fairly late hour. As the Minister of State will perhaps tell us, clause 16 is necessary to enable the United States double taxation treaty, if and when it is ever signed, to have full legislative authority. I am not asking the Minister of State to give the reasons for the clause, which are well understood. I have no objection to it. I should, however, like him to tell us his intentions in relation to the treaty.
We read in the press again today that the hon. and learned Gentleman may depart for Washington in the autumn and may even be forced to travel to California to discuss the unitary system. This is an excellent way for Treasury Ministers to spend the autumn. I understand that Washington is very pleasant at that time of year. I would not begrudge the Minister of State his efforts to see what can be done about the unitary system of taxation.
I also understand the representations that have been made by a certain section—a fairly small section but including some important companies—of British industry which has managed to stir up a reasonable-sized lobby over recent months against the treaty. I understand its objections to the unitary system.
It is matter for the Minister's judgment whether to pursue the signing of the treaty or its ratification by the House of Commons. He knows best. I suggest, on the other hand, that he should be careful not to embroil himself further in American domestic politics. There has been considerable difficulty, not of the British Government's making, due to the emotive question in the United States of states' rights. Some see the attempt to outlaw the unitary system, through a double taxation agreement, as an infringement of states' rights. One can understand their arguments.
We must be careful. Personally, I would prefer, once the Senate has ratified the protocol, to go ahead and complete the

ratification before the Summer Recess. This treaty has been kept in abeyance for too long. There is, as a result, a loss to the British Exchequer and to many British companies—and not to those which have been making the noise about the unitary system. There are many other companies, some in the oil industry. which wish to see the treaty ratified.
Perhaps the Minister of State could tell us his intentions and say why he thinks further delay is necessary, and why he believes that he will be able in Washington to impress upon the Americans the need to withdraw the unitary system of taxation. We do not want to wait too long for the treaty to be ratified. It has taken a long time already. It has been a hard treaty to negotiate, and there are definite benefits to this country of having it ratified.

Mr. Graham Page: I cannot be so kind about the clause as the right hon. Member for Llanelli (Mr. Davies). The Minister of State is the last person whom I should wish to stab in the back, but the clause is so unconstitutional that I am astonished that it should ever appear in a Bill. It seeks to legislate about a treaty. I thought that that was the sole competence of the Executive, and not a matter for the legislature. It seeks to bind the House to two protocols about which we know very little. It is misleading in its incomplete reference to the convention. It talks about the convention signed on 31 December 1975, without reference to two later protocols and one that is in negotiation, and seeks to bind the House to those protocols as well as to the convention.
The clause attempts not to amend the statute—I should not object if it sought outright to amend the general application of section 497 of the Taxes Act—but to interpret that section just to suit an individual case. It is retrospective to the detriment of the taxpayer in that it withdraws relief to which taxpayers have been entitled over the past five years. It even fails to describe the nature and extent of that relief which it seeks to take away.
The clause seeks to deprive the other place of any power to debate this retrospective legislation. If it remains in the Bill, it will empower the Chancellor of the Exchequer to introduce a draft order


into the House carrying out retrospection and depriving taxpayers of relief to which, under the present law, they are entitled. Because it will be a draft order, which needs the approval only of a resolution in this House, the other House will be precluded from debating it.
In the Treasury's notes on the Finance Bill, which are available from the Vote Office, we read:
 Clause 16 enables full effect to be given to the provisions in the proposed new double taxation convention with the United States".
It is " the proposed … convention ", so still we do not know that it is a firm convention. Indeed, it has never been ratified. But apart from that it has three protocols attached to it, one of which is not yet settled.
The background notes are frank also about the retrospective effect of the clause. We are told that it gives effect to those provisions
 … despite a long delay in ratifying the convention (signed in 1975) which has meant that it affects years which have now passed, and in some instances withdraws reliefs available under the existing convention.
Then follows this strange statement:
 The clause is only an enabling provision: the substantive decision whether or not to ratify the Convention will still depend on an affirmative resolution of the House of Commons.
Surely we should not have a resolution affirming a treaty. We shall have to consider a draft double taxation order under the Taxes Act to confirm the relief, or otherwise, that may arise from a treaty.
The convention was signed in December 1975, but it has not been ratified. It contains an article limiting the right of American states to impose unitary systems of tax on United Kingdom companies. Unitary taxation means, for example, that a subsidiary of a United Kingdom company operating in California, for instance, may be taxed not merely on its earnings in California but on the earnings of itself and the group throughout the world. That is what California and the state of Oregon threatened to do.
Another objection to clause 16 is that when mentioning section 497 of the Taxes Act it implies that this is merely a matter of double taxation. It is far more damaging

to this country than that. We are being asked to bless unfair taxation by agreeing that the Chancellor can produce a draft order instead of fighting it through diplomatic channels, as we should.
There was a subsequent protocol to the original article in the convention that the Federal Government of the United States would not impose unitary taxation on United Kingdom companies. That is not good enough. We want that undertaking not only from the Federal Government but from individual states.
The third protocol that is being negotiated puts back the original article limiting the American states in their action.
12.30 a.m.
During the Second Reading of the Bill the Minister of State tried to assure us that clause 16 was an enabling provision. If the clause had an aim or purpose, it is to enable the Chancellor to put before the House a draft order which otherwise he would not have the power to do because of its retrospective element. It endeavours to persuade the House to pass subordinate legislation, and thus preclude the other place from debating retrospective legislation.
This clause is so unconstitutional that it should be taken out of the Bill. I am not concerned so much about disturbing a treaty between Britain and the United States. I am concerned about the way in which this is being dealt with in our legislation. There must be a better way to achieve agreement on this difficult taxation problem. We should not foist a solution on the House by means of a clause which interprets rather than amends a statute and authorises the House to do something which it would not normally countenance. This is retrospective legislation—five years' retrospection—against relief which a taxpayer has been allowed, and to the detriment of the taxpayer. I ask the Minister of State to think again about the clause.

Mr. Peter Rees: I have to respond to the blandishments of the right hon. Member for Llanelli (Mr. Davies) and also deal with the extremely powerful speech by my right hon. Friend the Member for Crosby (Mr. Page). He and I have on many occasions battled long and hard against the principle of retrospection. I hope that I can persuade him, and the


Committee, that this is a special situation and that perhaps not all the circumstances have been as fully deployed in this debate as he would have liked. All I can say in extenuation is that I endeavoured to deal with this point during the Second Reading of the Bill, but the hour was late and the House was perhaps, understandably, not disposed to listen or to demand too close an exposition on that occasion. I hope, therefore, that the Committee will bear with me on this occasion.
The provision in clause 16 is an enabling one. I think that so much is common ground. It is designed to amend section 497 of the Income and Corporation Taxes Act, but it is a provision which will, if the Government are so minded when they have considered the position properly, enable them to lay an order before the House, which the House will be able to debate fully and which will translate into our domestic legislation the double taxation convention which has been signed with the United States, together with three amending protocols. Perhaps my right hon. Friend will allow me to correct him on one point. The convention was signed many years ago, as he correctly stated, and all three protocols have actually been signed. The third one was signed as recently as 15 March 1979.
The reason for this enabling provision is that an inordinate length of time will have elapsed since the convention was signed and the date when, possibly, it could be put into effect, subject to the amending protocols, if the House is so minded. I emphasise very strongly, with deference to my right hon. Friend, that there is on this occasion no particular call, unless the Committee desires to do so, to debate the substantive issue, the actual merits of the double taxation convention. There will be ample opportunity for that should an order be placed before the House.
I am caught in the cross-fire, though it is not for me to complain. The right hon. Gentleman suggests that the order should be laid before we rise for the Summer Recess, and my right hon. Friend suggests that perhaps it should not be laid at all. I think that the merits of the order could more properly be explored when, and if, it became necessary to lay

it before the House. I emphasise that the clause is a purely enabling provision.
I concede at once that there is a measure of retrospection here. That derives purely from the fact that about four or five years have elapsed since the convention itself was signed. The convention was designed to supersede an earlier double taxation convention, which is currently in force. The new convention, if ratified on both sides of the Atlantic, will supersede the old one, and to that extent the reliefs to which the taxpayer, both here and across the Atlantic, would have been entitled under the old convention will be superseded by such new reliefs as he could claim under the new convention.
This is a special situation and one which I am sure the Committee will appreciate does not normally occur. In extenuation I can say that under the previous Administration—to be exact, in January 1977—the House had occasion to debate the merits of the main convention very fully. They were fully explored from both sides of the House, which approved it with certain reservations. The principles were clearly accepted, so it cannot be said that the House has not had a previous opportunity to canvass, consider, debate and come to a conclusion on the main principles of the convention.
I concede that, in a technical sense, there is a measure of retrospection here. Anyone likely to have been affected by the withdrawal of reliefs under the old convention and the substitution of new, and slightly different, reliefs under the new convention has been put on notice for many years. There is no question of anyone having been taken by surprise. If there is retrospection here, it derives from a special situation and is of a highly technical nature.
The right hon. Member for Llanelli said that we should be chary of involving ourselves in a delicate diplomatic situation. No one is more conscious of that than myself and the right hon. Gentleman because the initial convention and, on dates, all three amending protocols, must have been considered, advised upon and approved by the right hon. Gentleman and his right hon. and hon. Friends.
We are sensitive to those issues particularly because today, allowing for a slight difference in time, the Senate will


be considering whether to ratify the convention and the three amending protocols. It would be tactless in the extreme for us to intervene in what is primarily a matter of states' rights, although it has a considerable bearing on British companies and many other foreign companies operating on the other side of the Atlantic.
These are always delicate matters when the House is debating a treaty, particularly a double taxation convention. There is no question of asking the House of Commons to legislate about a treaty. My right hon. Friend the Member for Crosby is always very exact and uses words fastidiously. He will appreciate, on reflection, that this is not legislation about a treaty. In due course the House may be asked to debate and embody in our domestic legislation fiscal provisions which will be based on the double taxation convention and the amending protocols. But that is, after all, common form, and I believe that we have had double tax conventions for at least 50 years, and maybe longer. This is, therefore, something that the House of Commons is well used to.
The point of discord concerns the possibility that individual states of the United States may be minded to impose the unitary system on United Kingdom companies, or, to be more exact, on their subsidiaries operating over there. The original convention, as it was before the reservation introduced by the Senate, by article 9(4) specifically debarred the federal authorities of the United States and Her Majesty's Government and individual states of the United States from imposing a unitary system. Unfortunately, and it is not for me to explain here tonight why, the United States Senate entered a reservation a year or so ago, and the necessary majority would not, therefore, have been forthcoming for the Senate to ratify the convention unamended.
It therefore became necessary to negotiate a protocol, which was the third protocol, signed in March this year, under which a new article 9(4) was substituted under which only the federal authorities and Her Majesty's Government are debarred from imposing the unitary system. This is, of course, a matter of regret for

us. We would much have preferred to see the original article 9(4).
Without seeking to canvass the merits of the issue, I can say that I well understand the concern of British and other foreign companies in the United States which are concerned about this matter. However, our Government are not empowered to enter into separate negotiations with the individual states of the United States. This issue counts as a matter of foreign affairs, and all foreign affairs are the concern of the federal authorities. We have had a report that where the question of States' rights are concerned it is a matter of considerable constitutional delicacy in the United States.
The previous Labour Administration here evidently felt that it was right—and I am not certain that I entirely dissent from that view—to accept the convention in this truncated form, recognising that neither the federal authorities nor Her Majesty's Government have expressed, explicitly or implicitly, any approval for the unitary system. This is perhaps the question of substance to which we can return if any order is laid before the House embodying the convention in our domestic legislation.

Mr. Graham Page: Does my hon. and learned Friend mean that within the double taxation order that we shall be asked to approve there will be some sort of approval of the freedom of the states to use the unitary tax system against our companies there? It seems to be that by approving the clause we are giving some blessing to that. If it was previously in the treaty, if it is taken out of the treaty and the states are allowed to do that, and if we approve the treaty, or the double taxation provisions of it, are we not approving this unitary taxation system on our companies in the states?

12.45 a.m.

Mr. Rees: No. I do not think that that construction is possible. I do not think that anyone who has followed our debates or looked at the convention as amended could possibly draw that conclusion. In the convention, with the amending protocols, there is a specific provision prohibiting the federal authorities and Her Majesty's Government from imposing the unitary system. How, then, it could be argued that we are tacitly


approving the unitary system, I do not understand.
If, and when, we come to debate this—if the House is so minded—we shall indicate by any means that is open to us that we do not approve and do not support the imposition of the unitary system either by individual states of the United States or by any other state with whom we may be in commerce. This point has been taken up with me. I have been pressed strongly on this matter. I reassure the Committee that no words that have fallen from this Administration, or, to be fair, from the previous one, could be construed as giving any support to the imposition of the unitary system by individual states of the United States or by any other foreign Government. We shall be able to come to the merits of the issue if and when an order comes to be laid before the House.
The right hon. Member for Llanelli pressed me to say that we shall lay the order immediately. I do not know what would have been in his and his right hon. Friends' minds had he been standing at this Dispatch Box tonight. Perhaps they would have brought in the order. We have taken a different view. We have come late to this problem. We have considered it before, but, inevitably, one has to wait until one is presented with the papers. It is for that reason that I have accepted an invitation from an assistant secretary to the United States Treasury, Mr. Lubick, to go to Washington in September to review the scene with him. I know that the right hon. Gentleman has encouraged me to do that and has sung the charms of Washington in the autumn, and who knows better than he about this? This is not, as I said, a personal pleasure jaunt. There will be serious business to attend to. [HON. MEMBERS: " Hear, hear."] I am grateful for the unanimous support of the Committee. Mr. Lubick, who has visited this country, has been left in no doubt of our concern about this matter. Indeed, I think it is fair to say that the United States federal authorities are concerned about it. They are concerned about the constitutional implications.
There are two other points that deserve exploration and can be better explored over there than they can in this Committee or anywhere on this side of the Atlantic. I

understand that Senator Mathias is to introduce a Bill, one of the provisions of which will be to disable a state from introducing the unitary system. It is not for me to pass any judgment on the advisability of such legislation or whether it is likely to commend itself to the Senate. All I say is that this is one of the matters that I shall wish to consider and examine in Washington.
Secondly, there has been a certain amount of litigation in the United States—one case in California was that of Japan Line v. County of Los Angeles—where various companies have sought to challenge the constitutionality of the unitary system, with a measure of success, but it will be important to determine whether there is likely to be more litigation or whether the eventual outcome will be a federal decision that will demonstrate that this kind of tax system introduced by an individual state is not constitutional. These are difficult matters to explore from this side of the Atlantic, and difficult for us to debate and explore at this time in this convention's history.
I hope that I have reassured the Committee that there is no question whatever of our endeavouring to rush through some botched-up piece of domestic legislation, legislating, as my right hon. Friend said, on a treaty. If, on my return from Washington, I feel that it is appropriate, and if my right hon. and learned Friend feels able to accept such advice as I am able to tender to him, perhaps in due course, in the autumn, an order will be laid before the House and the House will be able to debate it. No doubt the Patronage Secretary and the Chancellor of the Duchy of Lancaster who organise Government business will make full time available for that. We shall then be able to debate the substantive issues and go over this ground again.
I remind the Committee that we went over the convention itself in January 1977. I did imperfectly touch on these issues during the Second Reading debate. I hope that I have reassured the Committee that nothing improper, and certainly nothing that is disadvantageous to this country, is being proposed in clause 16. I hope that the Committee will therefore support me and that the clause will stand part of the Bill.

Question put and agreed to.

Clause 16 ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Lawson].

Committee report Progress; to sit again this day.

HOUSE OF COMMONS MEMBERS' FUND

Ordered,
That Sir Nigel Fisher, Mr. Grimond, Sir John Langford-Holt, Mr. Alfred Morris, Mr. John Parker and Mr. Albert Roberts, be appointed Managing Trustees of the House of Commons Members' Fund in pursuance of section 2 of the House of Commons Members' Fund Act 1939.—[Mr. John Stradling Thomas.]

PARLIAMENTARY CONTRIBUTORY PENSIONS FUND

Ordered,
That Mr. Arthur Bottomley, Sir Nigel Fisher, Mr. Grimond, Mr. Anthony Kershaw, Sir John Langford-Holt, Mr. Alfred Morris, Mr. John Parker and Mr. Albert Roberts, be appointed Managing Trustees of the Parliamentary Contributory Pensions Fund in pursuance of section 1 of the Parliamentary and Other Pensions Act 1972.—[Mr. John Stradling Thomas.]

CIVIL SERVICE SCIENCE AND TECHNOLOGY GRADES (PAY)

Motion made, and Question proposed, That this House do now adjourn.—(Mr. Wakeham.)

12.52 a.m.

Mr. Tom Benyon: I am glad to have the opportunity to speak on an important subject, albeit for a brief time. I begin by congratulating my hon. Friend the Member for Southend, West (Mr. Channon) on his appointment as Minister of State, Civil Service Department. I recognise that he has inherited the problem that we shall discuss tonight. He will, I am sure, wish to avail himself of the opportunity of clearly stating the Government's future attitude towards the scientists and engineers, whose work is of such importance.
I cannot deal with the pay issue in detail. The details of the highly complex pay offers and structures are doubtless as well known to my hon. Friend as

they are to me. It is more important to talk in terms of attitude and principle for the future. My hon. Friend will know that ill-feeling has been gestating for more than 15 years and that it has now blossomed into bitterness and acrimony. I have received more than 500 letters from dissatisfied constituents, and many colleagues in the House and present in the Chamber tonight have suffered a like fate. I mention but some: my hon. Friends the Members for Devizes (Mr. Morrison), Salisbury (Mr. Hamilton), Hitchin (Mr. Stewart), Twickenham (Mr. Jessel), Huntingdonshire (Mr. Major), Oxford (Mr. Patten), Fareham (Mr. Lloyd), Newbury (Mr. McNair-Wilson), Galloway (Mr. Lang), Renfrewshire, East (Mr. Stewart), and Brighton, Kemptown (Mr. Bowden). The constituents who have written to me are moderate men, members of a moderate union; men slow to anger, who view industrial action with extreme distaste and who have been forced to strike.
Scientists and engineers believe, and there is substantial evidence for it, that the Civil Service Department has been waging a long vendetta against them. They further believe that neither the Government nor our fellow countrymen realise how important they are and that the administrators eat the cream, leaving the milk for them.
My hon. Friend will know that I am privileged to have many scientists and engineers living and working in my constituency. Their roles are vital for the future for our country.
I begin with Harwell, a multi-purpose research and development establishment which has moved into contract research and now receives 60 per cent. of its revenue from sources other than the atomic energy Vote. These funds approximate to £30 million, a remarkable achievement from a team effort inspired by Dr. Walter Marshall. This is surely one of our country's few great success stories since the war.
Next, I turn to the Rutherford Laboratory, which is the largest establishment of the Science and Research Council. Its function is to provide front-line fundamental research for universities. It is of key importance to the country's future, in terms of both education and research.
I come now to Culham, this country's main establishment for the investigation of nuclear fusion, which may hold the ultimate answer to our energy problems. It is host to the Joint European Torus, JET, which is a crucial step forward in fusion research.
Scientists and engineers are the cutting edge in those establishments. The calibre of talent is immensely great. Their contribution to our country's future, in terms of technical research and provision of energy, is hard to exaggerate. The scientists and engineers must expand our civil nuclear programme over the next 20 years to fill a substantial gap that will be left by the decline in supplies of oil and natural gas. Nuclear power is the only new source that can possibly produce energy on the scale that we need.
That is why the scientists and engineers are so important. However, as I have indicated, morale is at an all-time low. They believe that the Civil Service Department holds them in contempt. This must not be allowed to continue.

Mr. John Major: May I intervene briefly? My hon. Friend is right to touch on morale in the the matter of the negotiations. If my constituents with whom I have had discussions are an even sample of opinion across the country, the fact is that, for good reason or ill, both scientists and the professional and technological staff no longer believe that the Civil Service Department is treating them fairly. I do not know whether that attitude is justified, but it certainly exists, and it is a very potent force in the negotiations.

There are two particular points—

Mr. Deputy Speaker (Mr. Bernard Weatherill): The hon. Gentleman cannot make a speech. He asked whether he could intervene.

Mr. Benyon: My predecesor, Airey Neave, a valued friend of scientists, initiated an Adjournment debate in February 1974 on the same issue. A reader of Hansard at that time would have a sense of déjà vu as he listened to the debate tonight. That situation has hardly changed.
Most importantly, scientists and engineers are under-valued by our society. In other countries the reverse is

the case. I believe that our country's economic and industrial decline since the war is in part related to the way in which we undervalue our scientists and engineers in comparison with their opposite numbers in comparative administrative grades.
Further, I believe that pay research comes up with barely adequate results for scientists and engineers, as the pay of their analogues in the private sector is low. As my noble Friend Lord Home said when asked by a well-wisher " How is your wife? ", " Compared with what? " There are always difficulties in finding equitable comparisons. First, the structure of scientific groups in the private sector is different from that in Government bodies. The best scientists in industry are promoted to managers, so Government scientists feel that they are compared with the junior scientists in industry.
Also, a Catch 22 situation exists, in that the Government are the largest employer of scientists in the country, and employers look towards the pay of Government scientists to obtain guidelines. This clashes with the Civil Service Department's policy of acting as a follower rather than a leader in wage increase rounds.

Mr. Peter Lloyd: I should like to associate myself with what my hon. Friend says about the feelings of Government scientists and technical officers. They feel that in this year's negotiations the Government have unilaterally changed the basis on which the pay research is based. I hope that my hon. Friend the Minister of State will take up that specific point.

Mr. Benyon: I thank my hon. Friend for his intervention. Let us earnestly hope that the present small points of difference between the Civil Service Department and the IPCS over scientists' pay are speedily resolved before the scientists' morale becomes even worse.

Mr. Toby Jessel: If, as my hon. Friend says, the differences in negotiation between the two sides are small, is it not odd that the many scientists from the National Physical Laboratory at Teddington in my constituency, who have written to me and come to see me, and on whose behalf I asked a question in the House on 19 June, seem not to be aware of that? Can it


be that some of their leaders in their union have not kept them fully in the picture about the way that the negotiations have been proceeding?

Mr. Benyon: I heartily endorse my hon. Friend's comment.
I respectfully suggest that in future when the Pay Research Unit has deliberated its findings should include more than a glance at the international market place, where United Kingdom scientists and engineers with 10 to 20 years of expensive, hard-won experience are paid premium wages. At a time when the world energy crisis bites deep, our mean United Kingdom pay structure makes us a head hunter's paradise.
It is the scientists and engineers who are in demand, not the administrators. If the current pay situation is allowed to continue, there will be a notice outside Harwell that will read " When the last scientist leaves Harwell, will he please show the administrative officer how to switch off the machinery? "

I address myself to the P and T grades.

Mr. Michael Shersby: Is my hon. Friend aware that at the National Gas Turbine establishment at West Drayton in my constituency, a youngster with two A-levels will receive £5,020 as an executive officer at the age of 23, whereas a young scientific officer, with a degree, aged 24 will earn only £3,000? Is that typical of my hon. Friend's experience?

Mr. Benyon: I thank my hon. Friend for his eloquent intervention. He expresses the position far more succinctly than I do.
The P and T grades are deeply aggrieved about their position. I understand that the divide between the Civil Service Department and the IPCS as regards the P and T grades, the engineers and their colleagues is wide and hard to resolve. Their morale is as low as that of their scientific colleagues. It is hardly surprising.
On six previous occasions the settlements for the P and T grades were between the median and the upper quartile with comparisons outside the Service. This year their paymaster, the Civil Service Department, has decided to

cut their pay by about 15 per cent. below the basis of previous settlements.
This offer has been banged down on the table with a " no negotiation " thump. If I may say so, the way in which the union has been dealt with in this matter makes the way in which the pay of Members of Parliament has been dealt with look like an exercise in public relations excellence by comparison. The Civil Service Department wishes to go to arbitration immediately, ignoring the criteria and principles accepted in the past for determining the pay of this group.
The reasons for their premium rating are well known to my hon. Friends. I have no time to outline them here. Let us hope that the Civil Service Department will negotiate over this matter with the union at the earliest possible date. My hon. Friend will have in mind, I hope, the fact that the engineers are poorly paid. Currently, average earnings since 1973 have risen by 66 per cent. and P and T grades by merely 21·4 per cent. I also hope that the Civil Service Department will send a reply to Mr. McCall's letter of 4 July to Sir Ian Bancroft. It is understandable that my constituents feel like second-class citizens.
I ask my hon. Friend the following questions and, if possible, to give the following confirmations: first, are the Government committed to the cause of science in this country for the future? Secondly, is there a vendetta or even ill-will towards the scientists and engineers from the Civil Service Department? If there is, will he undertake to rectify that? Thirdly, will he confirm that he will ensure that the Pay Research Unit and arbitration proceedings are not biased against engineers and scientists? May I humbly volunteer as a candidate on behalf of my constituents to sit on either of those bodies? Fourthly, will he agree to rectify any situation where a scientist is paid less than an administrator of equal responsibilities and experience? If the Pay Research Unit throws up that anomaly, will he please devise a more sensible system of research?
We now have a new Government, the Prime Minister of which has two unique qualities, among others. She is a woman and a scientist. On behalf of my constituents, I ask my hon. Friend to use his best endeavours to ensure that scientists'


pay is fair so that they may continue their vital work.

1.5 a.m.

The Minister of State, Civil Service Department (Mr. Paul Channon): I first congratulate my hon. Friend the Member for Abingdon (Mr. Benyon) on his truly excellent speech this evening. It has done the House a service. The presence of a large number of Members of Parliament—mainly Government supporters, if I may say so without being unduly controversial—shows the deep interest that is felt in the House about this important matter. I am under no illusions whatsoever either about the importance of the subject or the wide interest that is felt by so many of my hon. Friends. I shall deal with my hon. Friend's points and those made by my hon. Friends the Members for Fareham (Mr. Lloyd), for Huntingdonshire (Mr. Major) and for Twickenham (Mr. Jessel), and by the many others present who have been in touch with me and who no doubt will be contacting me again on this topic.
I welcome this opportunity to put the record straight on the pay of scientists and professional and technology staff in the Civil Service. My hon. Friend the Member for Abingdon is right. It is known to those on both sides of the House that the pay of Civil Service scientists has been a difficult and contentious issue for most of the past decade. There has been a tremendous amount of ill-feeling and misunderstanding. I regard it as one of my most important tasks to lay to rest the disagreements of the past and to build up harmonious attitudes and relations for the future.
To answer my hon. Friend's first question, I must say that we live in a scientific and technological age. The Government understand and value the contribution which science and technology have to make to our way of life and standard of living. The Government have a major task in revitalising British industry and introducing new and up-to-date methods. The scientific and technical community will have a vital part to play in that. Within the Civil Service, specialist staff have an important role to play—many, for example, in defence, which is a matter of special concern to all Members of Parliament at present, and also in other areas. No one should underestimate the Government's appreciation of the work

done by our specialist staff. I am determined to treat them fairly; my colleagues in the Government are determined to treat them fairly; the management of the Civil Service is determined to treat them fairly.
One of the features that I have found most distressing in my first few weeks in office is the widespread distrust and suspicion of the administrative staff of the Civil Service Department amongst the specialists in the Civil Service. To answer my hon. Friend's second question, I must tell the house straight away that I have not detected any ill-feelings in my Department towards specialists—nor would I tolerate such an attitude for a moment if I found it. It would be quite wrong. I do not believe that it exists. I regard it as a major priority to put any unfounded suspicions to rest. Such divisiveness would be bad for any organisation. The specialists are civil servants and I am determined that they shall be treated fairly—just like all other civil servants.
Let me take first the case of the scientists. It is not my objective tonight to rake over old controversies, but in explaining how we got to our present position I must acknowledge that there is a difficult history connected with this.
When, in 1977, it was agreed that the Civil Service as a whole should return to pay research in 1979, the Institution of Professional Civil Servants demurred for scientists because it had reservations about the applicability of pay research for scientists. The question of how pay research should be applied to scientists in 1980 was referred to the Pay Research Unit Board. We now have its report and an agreed basis for determining scientists' pay in future. Indeed, the Pay Research Unit is now collecting the pay information for next year's pay settlement. However difficult the negotiations may be next year, I want to make it perfectly clear that we shall be approaching them with good will, with a desire to be fair to the scientists and with a determination that, like all other civil servants, they shall receive fair treatment.
For 1979, scientists were left with no agreed basis for determining their pay. That lack, and some correspondence concerned with it, lies at the root of the current unhappy dispute with the scientists. For a variety of reasons, the scientists


believe that they should have this year what their administration group colleagues have had.
The House will appreciate that I arrived in this situation very late in the day. The dispute is not of my making, nor of this Government's making. I arrived at the tail end of a settlement in the non-industrial Civil Service in which the scientists and the P and T people were already involved. There is a long history. I immediately recognised that there had been a genuine misunderstanding on this topic, and, recognising that fact, I have agreed to what the IPCS wants, which is a temporary pay link with Administrative civil servants for 1979. The IPCS asked at its annual conference for a gesture of good will from the new Government. I have made such a gesture, and in return all I have asked is that that agreement, and the pay rates flowing from it, should not upset the pay arrangements for 1980, or the pay arrangements for other groups of civil servants. That seemed to me to be perfectly reasonable.
The IPCS has accepted that a ring fence should be put round this year's arrangements. All that we need to do, therefore, is to establish a form of words that will avoid repercussions and misunderstandings. Negotiations have taken place on this and substantial progress has been made. I very much hope that I shall be able to make an announcement later today.

Dr. M. S. Miller: I am grateful to the Minister for allowing me to intervene. I am concerned with the form of words, because, according to my information, apparently there has been a great deal of suspicion and ambiguity about some form of words that has been chosen in the past. Will the Minister undertake to ensure that he deals with this form of words himself and does not allow his advisers to put him off by increasing the ambiguity which hitherto has applied to forms of words which have been put forward?

Mr. Channon: Any words that go forward will certainly be my responsibility, and I shall accept full responsibility for them, but I would prefer to go no further tonight than to say that substantial progress has been made. As I told the

House, I hope to be in a position to make an announcement later today.
The other pay dispute with the IPCS affects technologists, engineers and certain other professionals. This is an entirely separate and distinct issue. These are staff who have been the subject of a pay research exercise like the rest of the Civil Service, except the scientists, for 1979. Extensive negotiations have taken place. There is no dispute about the facts thrown up by the pay research exercise, but the IPCS and my Department have been unable to agree on the revised pay rates. Again I must emphasise that there has been no question of discrimination. The technologists and engineers and other professionals have been treated in exactly the same way as the rest of the Civil Service.
The pay research evidence was interpreted in precisely the same way as that for all other civil servants. They have settled but the IPCS has not. The arguments which the IPCS put forward have been examined in detail and it has been informed that my Department cannot agree to the increases which it has sought. Hon. Members may be interested to know that the offer which my Department made represents an overall average increase of 17·5 per cent. to the professional and technology staff. For the principal professional and technology officer, the offer represents an increase of approximately 22·5 per cent. and would lead to a maximum salary of £10,700. If the IPCS cannot accept the offer, made after careful examination of its case, it is at full liberty—I emphasise this—to take its claim to the independent Civil Service arbitration tribunal to seek to convince that tribunal that its reasons are sound. The Civil Service arbitration tribunal is composed of an independent chairman assisted by two assessors drawn from panels nominated by the staff and official sides.
We shall accept the decision of the tribunal, whatever it is. I cannot accept—and I hope that the House agrees with me—that in these circumstances there can be any justification for industrial action by members of the IPCS over the current disputes. There is well-tried and established machinery for the resolution of disputes, and I think the House will agree that unjustified industrial action can


undermine the whole Civil Service negotiating machinery. I much regret any inconvenience to right hon. and hon. Members caused by industrial action, and I deprecate any attempt to interfere with the operation of Parliament.
I have been told by the IPCS that it considers that there is an issue of principle at stake here which is not suitable for arbitration. The IPCS has not told me what that principle is. It has admitted that the Civil Service Department has never accepted that the pay of professional and technical staff should be settled on a more favourable basis in relation to outside evidence than is the case for other civil servants—that is at the upper quartile rather than the median. As for the other reasons which the IPCS has put forward for favourable treatment, the judgment that the Civil Service Department made is consistent with that made in 1974, when the IPCS was happy to take the dispute to arbitration. The offer is, moreover, firmly grounded upon the Priestley fair comparisons principle, the current pay agreements, and the current evidence. I urge the IPCS to call off its disruptive action and refer its claim to the independent Civil Service arbitration tribunal, the findings of which the Government will accept.
One of my hon. Friend's essential points is that perhaps we do not value scientists and technologists sufficiently highly. But the Civil Service cannot take the lead and push its salary rates well above the national market. To do that would either starve British industry—on which ultimately all our salaries depend—of the very talent that it urgently requires, or it would increase costs if it attempted to match a higher rate.
I am determined to have a fair rate of pay when dealing with professional and technical staff. I urge on them the independent nature of the Civil Service arbitration tribunal. I believe that in this sector, as in virtually every other sector of our national life, industrial action should be the last resort. When a tribunal of this kind exists it is a great pity that industrial action should be taken.

Mr. Michael McNair-Wilson: Is my hon. Friend aware that a delegation of the scientific grades came to see me last Saturday and told me that in all the offers made to them they are

between ½ per cent. and 3½ per cent. below the equivalent in the administrative grades? The scientific staff find it difficult to see how the Minister can talk about equity when they are discriminated against and offered rises which are based on lower salaries, which makes the difference considerable.

Mr. Channon: Is my hon. Friend talking about scientists as opposed to professional and technology

Mr. McNair-Wilson: Scientists.

Mr. Channon: As I said earlier, we have made substantial progress and I hope that it will be possible for me to make a further announcement later today. I hope that my hon. Friend will be kind enough to await that further announcement. I wish that I were in a position to make it now, but, unfortunately, I am unable to do so.
I welcome the opportunity tonight to make clear the Government's position with regard to the pay of scientists and technologists. Can we not put behind us the difficulties of the past? They are certainly not the fault of the present Government. Let us put the difficulties of the past behind us. Recognising the contribution that scientists and professional technologists make to our national life, and the fact that they are responsible professional people, I think that I am entitled to ask them to conduct their industrial relations in the sensible way that we know they wish. They have been so moderate in the past.
I give them my assurance, on behalf of the Government, that they will be fairly treated. There will be no turning back on that. The Government are determined to treat these people fairly. We are determined that they shall not be discriminated against. There is no vendetta against them. I am determined to make sure that they have fair treatment in the Civil Service, and I again urge the IPCS to go to the Civil Service arbitration tribunal, where it will have a fair hearing. On behalf of the Government, I undertake to accept whatever may emerge as a result of the Tribunal's findings.

Question put and agreed to.

Adjourned accordingly at twenty minutes past One o'clock.